European Stocks Decline; Benchmark Stoxx 600 Index Falls
European stocks declined as U.S. Speaker of the House John Boehner said he supports the president’s call for action against Syria, offsetting better-than-forecast manufacturing data.
Vodafone (VOD) Group Plc slipped 5 percent as shareholders weighed the details of the $130-billion deal to sell its stake in Verizon Wireless. Nokia Oyj soared 34 percent after Microsoft Corp. agreed to buy its handset business for 5.44 billion euros ($7.2 billion). Dufry AG, the operator of duty-free stores, climbed 3.4 percent after winning contracts in Brazil.
The Stoxx Europe 600 Index fell 0.4 percent to 301.78 at the close. Stock markets were rattled earlier, with the gauge losing as much as 0.7 percent, by what Israel said was a joint flight test with the U.S. of its Arrow missile-interception system over the Mediterranean Sea. The measure lost 2.4 percent last week on concern the U.S. and its allies would take military action against Syria for chemical-weapons attacks that the Obama administration said killed more than 1,400 people.
“Markets should explode on such good economic data from the U.S., but there are other factors making investors more prudent,” said John Plassard, vice-president at Mirabaud Securities LLP in Geneva. “Markets are still nervous and volatile on any news coming out of Syria as we saw earlier. Investors are also weighing improving economic numbers looking ahead to any tapering talk from the Fed’s next meeting.”
Boehner, an Ohio Republican, told reporters after meeting with President Barack Obama that the use of chemical weapons requires a response and only the U.S. has the capability to “warn others around the world that this type of behavior is not going to be tolerated.”
The U.S. Institute for Supply Management’s manufacturing index increased to 55.7 in August from 55.4 a month earlier, the Tempe, Arizona-based group said today. The median forecast of 85 economists surveyed by Bloomberg called for the measure to rise to 54. A reading of 50 is the dividing line between expansion and contraction.
Data due on Sept. 6 may show that U.S. employers added more workers in August. Payrolls probably rose by 180,000 last month, after adding 162,000 in July, according to the median forecast of economists in a Bloomberg News survey.
The Federal Reserve holds a policy meeting on Sept. 17-18 to decide whether to slow the pace of its bond-purchase program. Fed Chairman Ben S. Bernanke has said that the central bank may consider tapering if the employment outlook improves substantially and the economy grows as forecast.
National benchmark indexes declined in 11 of the 18 western-European markets today. France’s CAC 40 and Germany’s DAX each retreated 0.8 percent. The U.K.’s FTSE 100 lost 0.6 percent, while Greece’s ASE advanced 2.4 percent.
Vodafone lost 5 percent to 202.5 pence as Verizon Communications Inc. agreed to buy the U.K. company’s 45 percent stake in Verizon Wireless for $130 billion. The payout was structured to prevent Vodafone from ending up with a large stake in Verizon, two people familiar with the terms said. That forces Vodafone investors who’d prefer cash, or aren’t authorized to hold Verizon stock, to sell the shares they receive.
Analysts including Robin Bienenstock at Sanford C. Bernstein said the so-called fixed value collar agreement, a deal that protects the buyer from significant fluctuations in the stock’s price between the start and completion of a merger process, leaves investors “bearing potentially large downside risk in Vodafone shares.”
Suedzucker AG fell 12 percent to 21.84 euros, for the worst performance on the Stoxx 600 and its biggest drop since at least October 1998. Exane BNP Paribas SA cut the maker of sugar, starch and bakery additives to underperform from neutral, meaning investors should sell the shares.
Exane said Suedzucker will need significant restructuring to prosper amid increased competition and lower profits when the current regulatory regime for the industry ends in 2017.
Nokia (NOK1V) rallied 34 percent to 3.97 euros, its biggest gain since at least 1991. The deal with Microsoft includes 3.79 billion euros for the devices unit and 1.65 billion euros for patents, the companies said. Nokia Chief Executive Officer Stephen Elop will step aside to return to Microsoft.
A gauge of European technology shares posted the best performance of the 19 industry groups on the Stoxx 600. Alcatel-Lucent SA rallied 9.2 percent to 2.20 euros, while Ericsson AB jumped 5 percent to 82.50 kronor.
Dufry climbed 3.4 percent to 130.30 Swiss francs. The company said it signed long-term contracts with airports in Brazil and is investing $250 million to $275 million in its projects in the country.
“Dufry (DUFN) will continue to be the leading retailer in Brazil,” Rene Weber, an analyst at Vontobel Holding AG, wrote in a note to clients today. “With the new contracts, Brazil will come back as an important growth driver. We view this as a positive step.”
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