European Stocks Drop as U.K. Economy Shrinks, Spanish Banks Fall
European stocks dropped after Britain’s economy unexpectedly shrank in the fourth quarter, while banks tumbled as plans to strengthen Spanish lenders failed to ease concern about the region’s sovereign-debt crisis.
Bankinter SA slid 5.2 percent and Banco Santander SA lost 3.5 percent. STMicroelectronics NV, Europe’s largest chipmaker, fell 4.5 percent after the company’s ST-Ericsson wireless venture reported increased losses. Ericsson AB limited declines, rallying 2.5 percent after saying fourth-quarter sales beat analysts’ estimates.
The benchmark Stoxx Europe 600 Index lost 0.7 percent to 280.10 at the 4:30 p.m. close in London, ending a two-day advance. The gauge rose yesterday amid optimism that economic reports this week will show the U.S. economy is gathering strength. European stocks last week posted their first weekly decline this year.
“The sovereign-debt crisis is an issue that will come and go through the whole year and will create volatility,” said Markus Wallner, a senior equity strategist at Commerzbank AG in Frankfurt. “However, corporate profits are not made in Greece or Ireland and we have a very good quarterly earnings season with strong results. Some clients want to buy equities, but are waiting for lower prices to get into the market.”
Stocks tumbled after the Office for National Statistics in London said the U.K.’s gross domestic product fell 0.5 percent in the three months through December after increasing 0.7 percent in the previous quarter.
Economists had forecast a 0.5 percent gain, based on the median of 33 predictions in a Bloomberg news survey. The country’s economic growth would have been “flattish” in the quarter without the cold weather, the statistics office said.
“The weak GDP figure has thrown a spanner in the works for the Bank of England,” said Manoj Ladwa, a London-based senior trader at ETX Capital. “An interest rate hike to counteract inflationary pressures would be easier to justify if the economy was pushing forward, but given the fragility of the recovery, policy makers are once again left in limbo.”
Stocks earlier pared some of their declines as a report from the U.S. Conference Board showed confidence among consumers rose more than forecast in January to the highest level in eight months as Americans grew more optimistic about job prospects.
National benchmark indexes fell in 13 of the 18 western European markets. France’s CAC 40 dropped 0.3 percent, the U.K.’s FTSE 100 lost 0.4 percent and Germany’s DAX slid 0.1 percent. Spain’s IBEX 35 tumbled 1.4 percent.
Spanish banks led declines in financial shares. Bankinter slumped 5.2 percent to 4.83 euros, while Santander slid 3.1 percent to 8.76 euros. Banco de Sabadell SA tumbled 2.2 percent to 3.54 euros.
Spanish Finance Minister Elena Salgado, speaking at a news conference in Madrid late yesterday, said the country’s lenders require no more than 20 billion euros ($27.2 billion) of extra capital, “all or part” of which they will be able to raise in financial markets.
The Spanish government will make the banks adopt a core capital ratio, a measure of financial strength, of at least 8 percent, Salgado said. Lenders will have until the autumn to raise enough capital to meet the rules. Those that fail to comply can tap the state’s bank-rescue fund, known as FROB, in return for ceding voting shares to the state.
“While we think the plan is a step in the right direction, we would prefer a shorter implementation period and an additional 20 billion euros of capital,” said Sergio Gamez, London-based analyst at BofA Merrill Lynch Global Research.
STMicroelectronics fell 4.5 percent to 8.18 euros. ST- Ericsson, a 50-50 joint venture with Ericsson AB that makes chips used in mobile phones, said yesterday that its net loss widened to $177 million in the fourth quarter from $121 million in the third quarter.
Lanxess AG, Germany’s biggest publicly traded specialty chemicals producer, slid 3.4 percent to 51.29 euros. The company said Chief Financial Officer Matthias Zachert has expressed a wish to leave the company to take up a position elsewhere. Lanxess commented in a telephone interview today.
Zachert will join Merck KGaA, Manager Magazin reported earlier today.
Ericsson, the world’s largest maker of wireless networks, rallied 2.5 percent to 79 kronor. Fourth-quarter revenue rose 8 percent to 62.8 billion kronor ($9.6 billion), exceeding the 59.5 billion-kronor average estimate of 36 analysts. Net income rose to 4.32 billion kronor from 314 million kronor in the year- earlier period, the company said.
ASML Holding NV, Europe’s biggest maker of semiconductor equipment, gained 4.2 percent to 29.71 euros. Infineon Technologies AG rallied 4.6 percent to 7.55 euros.
Novo Nordisk A/S climbed 1.4 percent to 622 kroner as the world’s biggest maker of insulin was raised to “buy” from “neutral” at Goldman Sachs Group Inc.
Renewable Energy Corp ASA advanced 1.4 percent to 19.5 kroner as Morgan Stanley raised its recommendation for the Norwegian renewable energy company to “equal weight” from “underweight.”
Fiat Industrial SpA rose 1.9 percent to 9.84 euros, paring yesterday’s drop. Nomura Holdings Inc. initiated coverage of the company, whose main assets are truck and tractor makers Iveco SpA and CNH Global NV, with a “buy” recommendation.
Straumann Holding AG jumped 2.1 percent to 222.9 Swiss francs after analysts at UBS AG raised their recommendation on the dental-implant maker to “buy” from “neutral.”
Anheuser-Busch Inbev NV gained 1.2 percent to 41.85 euros as the maker of Budweiser and Stella Artois sold $1.65 billion of debt in its first dollar-denominated offer in 10 months.