European stocks closed little changed, trimming losses in the final minutes of trading, after data showed Chinese manufacturing shrank for a second month and Federal Reserve minutes signaled stimulus cuts will continue.
BAE Systems Plc plunged the most since October 2008 after predicting profit will drop as much as 10 percent this year. Randstad Holding NV tumbled 11 percent after reporting quarterly results that missed estimates. TUI AG dropped 5.4 percent after one of its largest shareholders sold a 15.7 percent stake in the company. Technip SA rallied the most since July 2009 after saying its profit margin will increase next year.
The Stoxx Europe 600 Index slid less than 0.1 percent to 334.78, paring a loss of as much as 1.1 percent. The benchmark rallied 5.3 percent from Feb. 4 through yesterday as Fed Chair Janet Yellen pledged to continue her predecessor’s approach to stimulus policy.
“The speculation that the Fed will raise interest rates has unsettled the market,” Franz Weis, a fund manager who helps manage 4.5 billion euros ($6.2 billion) at Comgest SA in Paris, said in a telephone interview. “But what’s really at the base of the weakness in the market is the economic situation. And the outlook for corporate profit isn’t strong enough for markets to move forward unless they are continued to be supported by quantitative easing and low interest-rate policy.”
National benchmark indexes dropped in seven of the 18 western European markets. The U.K.’s FTSE 100 added 0.2 percent, Germany’s DAX lost 0.4 percent and France’s CAC 40 rose 0.3 percent.
A Chinese manufacturing index fell to the lowest level in seven months, data showed today. The preliminary February reading of 48.3 for a purchasing managers’ index from HSBC Holdings Plc and Markit Economics came in lower than January’s final figure of 49.5 and the 49.5 median estimate in a Bloomberg News survey. A number below 50 indicates contraction.
Fed policy makers said they would soon have to modify their commitment to keep the benchmark interest rate near zero until unemployment falls below 6.5 percent, according to minutes of their January meeting released yesterday.
“Participants agreed that, with the unemployment rate approaching 6.5 percent, it would soon be appropriate for the Committee to change its forward guidance in order to provide information about its decisions regarding the federal funds rate after that threshold was crossed,” the records noted.
Investor sentiment across stocks, bonds and currencies took a hit as violent clashes between the Ukrainian police and anti-government protesters worsened after a truce between President Viktor Yanukovych and opposition leaders crumbled.
The standoff began Nov. 21 when Yanukovych pulled out of a trade deal with the European Union, opting for $15 billion of Russian aid and cheaper gas. The opposition wants to put Ukraine back on the path toward EU membership.
Ukraine may be on the verge of a civil war, Polish Prime Minister Donald Tusk said yesterday. The EU has called for sanctions against Yanukovych’s government and a freeze of the assets of his most powerful officials.
BAE dropped 8.3 percent to 400.4 pence. Europe’s largest defense company said earnings per share will decline 5 percent to 10 percent in 2014 because of the pressure on the U.S. to contain its budget.
Randstad fell 11 percent to 44 euros, its worst retreat since March 2009. The world’s second-largest staffing company posted fourth-quarter sales that missed projections. Rabobank International downgraded the stock to hold from buy, saying profit trailed its estimate. Exane BNP Paribas said analysts may reduce their price estimates for Randstad after weak results.
TUI slid 5.4 percent to 13.02 euros, its biggest decline since August. Monteray Enterprises Ltd., controlled by trusts of Norwegian shipping magnate John Fredriksen’s family, sold 39.7 million shares in the company for 521 million euros. That leaves the Norwegian investor with 4.4 percent of TUI’s capital, the tour operator said in a statement.
Rexam Plc retreated 1.8 percent to 515 pence. Jefferies Group LLC said earnings estimates for the packaging company may need to be trimmed to reflect currency fluctuations. Jefferies made the observation after Rexam said underlying sales from continuing operations rose 1 percent in 2013.
Vedanta Resources Plc dropped 5.7 percent to 858 pence. HSBC Holdings Plc downgraded the oil and metal producer controlled by Indian billionaire Anil Agarwal to underweight, similar to a sell recommendation, from neutral, citing sluggish cash flow and weaker earnings from its most important divisions.
A gauge of commodity producers slumped the most among the 19 industry groups on the Stoxx 600, losing 1.1 percent.
Technip rose 9 percent to 69.99 euros. Europe’s largest oil-services provider by market value said its operating-profit margin from subsea operations will be at least 12 percent in 2014 and increase to 15 percent to 17 percent next year.
Suez Environnement advanced 6.3 percent to 14.01 euros, rising the most in 14 months. The second-largest European water company said net income rose 40 percent to 352 million euros in 2013, beating the 342.1 million-euro average of analyst estimates compiled by Bloomberg.