European Stocks Drop for Second Day to One-Month Low
European stocks declined for a second day, extending a one-month low, amid speculation the Federal Reserve will scale back its debt-buying program.
Roche Holding AG (ROG) sank the most since 2011 after a study showed that its Avastin drug failed to extend the lives of patients with a type of brain cancer. Munich Re and Hannover Re slipped more than 2.5 percent, leading reinsurers lower, as storms across central Europe caused rivers to swell, flooding Prague. Polymetal International Plc (POLY) added 1.9 percent after JPMorgan Chase & Co. raised its rating on the shares.
The Stoxx Europe 600 Index dropped 0.8 percent to 298.59 at the close of trading, the lowest level since May 2. The measure earlier climbed as much as 0.2 percent and fell as much as 1.2 percent. The gauge climbed 1.4 percent in May, completing its 12th consecutive month of gains. That was the longest winning streak since July 1997.
“Risk premiums are increasingly driven by the fear of a reduction in monetary stimulus,” Witold Bahrke, who helps oversee $55 billion as a senior strategist at PFA Pension A/S in Copenhagen, wrote in an e-mail. “Markets are moving into a good-news-is-bad-news environment when it comes to strong macro numbers, as strong figures increase the chance of the quantitative-easing punch bowl being taken away.”
The Stoxx 600 has fallen 3.9 percent since this year’s high on May 22 as investors weighed the likelihood of the Fed scaling back its monetary stimulus.
Fed Bank of San Francisco President John Williams said today that policy makers may start to reduce a bond-purchasing program in the summer and may end quantitative easing by the end of the year. Williams, who doesn’t vote on monetary policy this year, spoke to reporters in Stockholm.
The Institute for Supply Management’s factory index decreased to 49 in May from 50.7 in April, according to a report today. That fell short of the median forecast of 81 economists surveyed by Bloomberg for a number of 51. A reading below 50 means that activity contracted.
In China, HSBC Holdings Plc and Markit Economics said their index of manufacturing in the world’s second-largest economy fell to 49.2 in May from 50.4 in April. An official index for the industry, released on June 1, rose to 50.8 from 50.6.
National benchmark indexes retreated in 15 of the 17 western-European markets open today. The U.K.’s FTSE 100 slid 0.9 percent, while France’s CAC 40 (CAC) dropped 0.7 percent. Germany’s DAX lost 0.8 percent. Irish markets were closed for a public holiday.
Roche, the world’s biggest maker of cancer drugs, slid 3.7 percent to 230.30 Swiss francs for the biggest decline since November 2011. Avastin failed to extend the survival of patients with deadly brain tumors in a study that found no advantage in using the drug as a first-line therapy against the cancer known as glioblastoma.
Munich Re, the world’s biggest reinsurer, lost 2.7 percent to 140.80 euros and Hannover Re, the fourth-largest, dropped 3.3 percent to 56.39 euros.
Prague braced for the swollen Vltava River to crest today as the Czech government deployed hundreds of soldiers to avert a repeat of the 2002 floods that destroyed neighborhoods and caused $1.2 billion in damage. The German cities of Passau, about 30 miles from the Czech border, and Rosenheim declared a state of emergency and rivers in Saxony, Baden-Wuerttemberg and Bavaria burst their banks.
Separately, the Financial Times reported that U.S. property insurers seeking to manage the potential costs of natural disasters won price cuts for reinsurance policies of 15 percent on average.
Ingenico SA (ING), a French provider of payment terminals and services, decreased 3.4 percent to 50.92 euros for its biggest drop in three months. Berenberg Bank downgraded the stock to sell from hold, citing an increase in competition.
Lonmin Plc tumbled 4.3 percent to 282.4 pence after a National Union of Mineworkers member was killed and a second wounded in a shooting near the company’s Marikana mine in northwestern South Africa.
Polymetal, a Russian gold and silver producer listed in London, gained 1.9 percent to 703.5 pence. JPMorgan upgraded the shares to overweight, meaning investors should buy the shares, from neutral, citing changes in pricing and output.
Exor SpA, the Agnelli family holding company that is Fiat’s biggest shareholder, climbed 1.3 percent to 24.94 euros in Milan after selling a 2 billion-euro ($2.6 billion) stake in SGS SA, the world’s largest product inspector.
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