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European Stocks Little Changed as GlaxoSmithKline Falls

European stocks were little changed, closing near their highest level since January 2008, as GlaxoSmithKline Plc retreated after becoming the subject of a criminal investigation.

Glaxo dropped 1.6 percent after revealing that the U.K.’s Serious Fraud Office has started a probe into the drugmaker’s conduct. Elekta AB slid the most in three months as quarterly profit missed estimates. Osram Licht AG slumped 6.5 percent after cutting its sales forecast for the year ending in September. Smith & Nephew Plc rose 4.3 percent amid speculation that Stryker Corp. may bid for the medical-device maker.

The Stoxx Europe 600 Index fell less than 0.1 percent to 344.29 at the close of trading after earlier declining as much as 0.3 percent. The equity benchmark completed a five-day rally yesterday, its longest winning streak since April. The gauge has risen 1.9 percent in May.

“Investors are not overly bullish and there is little conviction in the recent rally,” said Michael Kapler, an equities portfolio manager at Mittelbrandenburgische Sparkasse in Potsdam, Germany. “Economic data in Europe has not been perfect, but there seems to be some growth from a low base in the peripheries. We need that to finally feed into earnings in the second half of this year. Valuations have climbed a lot and equities are not cheap any more.”

Equity Valuations

European equities have advanced 8.4 percent from their lowest level this year on Feb. 4. The Stoxx 600 trades at 15.4 the projected earnings of its members, up from a multiple of 13.8 at the beginning of the year.

Final figures released today confirmed that the European Commission’s measure of consumer confidence in the euro area rose to minus 7.1 this month, its highest level since October 2007.

A report from Germany’s Federal Labor Agency showed that the number of people out of work in the euro zone’s biggest economy unexpectedly increased in May. Unemployment climbed a seasonally adjusted 23,900. Economists had estimated it would drop by 15,000.

National benchmark indexes advanced in 11 of the 18 western-European markets today. The U.K.’s FTSE 100 and France’s CAC 40 both increased less than 0.1 percent, while Germany’s DAX slipped less than 0.1 percent.

Glaxo lost 1.6 percent to 1,608.5 pence, for the biggest drag on the Stoxx 600. The SFO has begun a criminal investigation into the drugmaker’s commercial practices, Glaxo said in a statement late yesterday. The investigation follows allegations in China that Glaxo’s employees bribed doctors, hospitals and medical associations to increase sales.

Elekta Plunges

Elekta, a Swedish maker of equipment for radiation surgery, slumped 9 percent to 84.20 kronor. Net income of 818 million kronor ($123 million) in the fourth quarter of the company’s financial year missed the average analyst estimate of 949 million kronor. Sales of 3.95 billion kronor also fell short of the average forecast.

Osram Licht declined 6.5 percent to 37.42 euros after predicting that sales will probably not increase in the 12 months through September. On Jan. 29, the lighting supplier forecast revenue would climb at least 3 percent this financial year. Separately, Bank of America Corp. lowered its rating on the shares to neutral from buy.

Hugo Boss AG dropped 2.5 percent to 103.15 euros after its majority shareholder reduced its holding. Buyout firm Permira Advisers LLP generated gross proceeds of 401.6 million euros ($547 million) by selling 5.6 percent of the shirtmaker’s share capital, according to a statement from Permira’s Red & Black Lux SARL division. The sale leaves the private-equity group with a stake of just over 50 percent in Hugo Boss.

Metso, Ahold

Metso Oyj fell 2.2 percent to 28.43 euros after Weir Group Plc abandoned its attempt to buy the Finnish maker of rock crushers. Weir said Metso’s board failed to engage in talks and rejected a revised all-share offer for the company yesterday. Metso said on April 1 that it would consider Weir’s original unsolicited approach. Weir retreated 1.9 percent to 2,554 pence.

Royal Ahold NV slipped 3.3 percent to 13.18 euros. The supermarket group reported underlying operating income of 392 million euros in the first quarter, less than the 399 million euros projected by analysts. Profitability in the U.S., its largest market, will be lower in the second quarter partly because of increasing commodity prices, it said in a statement.

Smith & Nephew, a maker of hip and knee implants, gained 4.3 percent to 993.5 pence. Stryker has hired advisers and is preparing financing for the bid, the Financial Times reported, citing people it didn’t identify. Smith & Nephew’s shares pared a rally of as much as 18 percent after Stryker said it doesn’t intend to make an offer for the company.

Telecom Italia SpA advanced 4 percent to 90.55 euro cents. Goldman Sachs Group Inc. added the stock to its conviction-buy list, saying the telecommunications operator will benefit from consolidation in the industry.

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