Europe Stocks Slip From Five-Year High; Paddy Power Drops
European stocks dropped from a five-year high as investors weighed equity valuations that are at the highest since 2009.
Paddy Power Plc slumped the most in five years after Ireland’s biggest bookmaker cut its forecast for 2013 profit growth. KBC Groep NV (KBC) fell 2.7 percent as two shareholders sold a combined 18.8 million shares in the Belgian bank. EasyJet Plc (EZJ) rallied 7.1 percent after announcing a special dividend.
The Stoxx Europe 600 Index declined 0.7 percent to 322.56 at the close of trading in London. The gauge yesterday jumped to its highest level since May 2008, extending a six-week rally. The Stoxx 600 is trading at 15.1 times projected earnings, higher than the 10-year average of 12.1 times earnings, according to data compiled by Bloomberg.
“This has been a great year and at some point you might want to take some risk off the table,” said Teis Knuthsen, chief investment officer at Saxo Bank A/S’s private banking unit in Hellerup, Denmark. “Some investors may want to sell into year end so the upcoming weeks may be less impressive. Perhaps one of the healthy signs about this year’s rally is that there’s a lot of nervousness in the system. Investors have been willing to pay more, but many people keep saying it isn’t sustainable.”
The Organisation for Economic Cooperation and Development cut its global growth forecasts for this year and the next. The world economy will probably expand 2.7 percent this year and 3.6 percent next year, down from its May predictions of 3.1 percent and 4 percent respectively, the Paris-based OECD said.
The Federal Reserve will release minutes of its October policy meeting tomorrow. The document will reveal more details behind the decision to press on with $85 billion in monthly asset purchases. Fed policy makers will probably pare that pace to $70 billion at their March 18-19 meeting, according to the median estimate in a Bloomberg survey.
Paddy Power (PWL) dropped 8.1 percent to 57.44 euros in Dublin after saying that poor takings from sports gambling will reduce earnings more than originally expected. Operating profit in constant currencies will increase by a low-to-mid single-digit percentage in 2013, down from a previous guidance for double-digit growth, the company said.
Ladbrokes Plc and William Hill Plc fell 1.8 percent to 175 pence and 2 percent to 361.3 pence, respectively.
KBC lost 2.7 percent to 39.60 euros. Shareholders KBC Ancora CVA and Cera CVBA sold the shares at about 39.15 euros apiece. Cera offered 14.1 million shares, more than half of its stake in KBC, while KBC Ancora sold 4.7 million shares.
Intertek Group Plc, a product-inspection services provider, slid 2.5 percent to 3,102 pence. The company said revenue excluding acquisitions increased 3 percent in the July-to-October period, down from 6.3 percent in the first half.
EasyJet advanced 7.1 percent to 1,345 pence. Europe’s second-biggest discount carrier proposed to pay 44.1 pence (71 cents) per share, in addition to a regular dividend of 33.5 pence. Pretax profit for the 12 months to Sept. 30 rose 51 percent to 478 million pounds, topping the 476 million-pound average estimate in a Bloomberg survey.
Royal KPN NV climbed 1.4 percent to 2.48 euros as Credit Suisse Group AG raised its rating on the phone company to outperform, which is similar to buy, from neutral. Credit Suisse predicted the stock will gain in value once the sale of KPN’s German business to Telefonica SA is completed.
Afren Plc jumped 8.1 percent to 161 pence, its highest price since July 2011, after more than trebling its estimate for recoverable oil from the Ogo prospect off the coast of Nigeria. Afren has a 40 percent stake in the project. Partner Lekoil Ltd, which owns a 30 percent stake, surged 20 percent to 59.5 pence.
The number of shares trading hands today in Stoxx 600-listed companies was 26 percent lower than the average of the past 30 sessions, data compiled by Bloomberg showed.
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