Europe Stocks Little Changed This Week; Petrofac Declines
European stocks were little changed, after six consecutive weeks of gains, as investors pondered prospects for economic growth and monetary policy.
Petrofac (PFC) Ltd. tumbled 17 percent after forecasting “flat to modest” profit growth for 2014. Sugar producer Suedzucker AG (SZU) fell 15 percent after saying earnings will not match expectations. Aberdeen Asset Management Plc (ADN) jumped 11 percent after Lloyds Banking Group Plc agreed to sell its Scottish Widows Investment Partnership division to the money manager.
The Stoxx Europe 600 Index lost less than 0.1 percent to 322.77 this week. The 600-share regional benchmark has surged 15 percent this year, reaching its highest level since May 2008, as central banks around the world pledged to continue their support for economic growth even as the Federal Reserve gets ready to consider tapering its monetary stimulus. The Euro Stoxx 50 Index (SX5E), a measure for euro-area shares, gained less than 0.1 percent this week.
“Tapering is an inevitable development that could be taken negatively in terms of market sentiment, but, however, it is fundamentally sound,” Ilario Di Bon, who helps oversee $7.6 billion as head of equities at Alliance Trust in London, said by phone. “It means that the recipe of the Fed starts to have an effect on the real economy. We are mending the system, as opposed to living in artificial support forever.”
Fed officials might reduce their $85 billion in monthly bond purchases “in coming months” as the economy improves, according to the record of the Federal Open Market Committee’s Oct. 29-30 gathering, released Nov. 20. Economists in a Bloomberg survey expect the central bank to begin reducing bond purchases in March.
The European Central Bank is considering a smaller-than-normal cut in the deposit rate if officials decide to take it negative for the first time, according to two people with knowledge of the debate. The central bank this month refrained from cutting the deposit rate, even as it reduced its key refinancing rate to a record low 0.25 percent.
Euro-area manufacturing expanded for a fifth month in November, London-based Markit Economics said Nov. 21, as Germany continued to drive the 17-nation currency bloc’s gradual recovery from a record-long recession. German business confidence surged to the highest level in more than 1 1/2 years, the Ifo institute’s business climate index showed yesterday.
“While the U.S. is having momentum, we believe Europe will start to play a positive role for markets as well,” Di Bon at Alliance Trust said. “I would expect 2014 to be favorable to equities.”
U.S. retail sales climbed in October by the most in three months, Commerce Department figures showed Nov. 20. The cost of living for Americans decreased in October, a separate report from the Labor Department showed. The consumer-price index dropped 0.1 percent, the first decline in six months, as costs fell for energy, apparel and new cars.
Petrofac, the oil and gas engineer that’s lost a quarter of its value this year, on Nov. 18 dropped the most since it listed in 2005 in London trading after predicting “flat to modest” profit growth. The shares fell 17 percent in the week.
Suedzucker plunged 15 percent, including its biggest two-day loss since at least 1998. Europe’s biggest sugar supplier on Nov. 21 cut its full-year sales and operating profit forecasts as sugar production missed expectations and business development declined.
Paddy Power Plc (PAP) dropped 12 percent. Ireland’s biggest bookmaker fell the most in more than five years on Nov. 19 after saying that poor sports gambling results will reduce operating profit more than expected.
The company’s takings from sports gambling since July missed its expectations by about 10 million euros ($13.5 million), with “notably poor results” from Champions League football and the Australian Spring Racing Carnival, Paddy Power said.
TUI Travel Plc (TT/) sank 7.6 percent, falling the most in two years yesterday. John Fredriksen’s Monteray, which had been its second-biggest shareholder, sold its entire stake in the travel company at 366 pence a share.
Aberdeen climbed 11 percent. Lloyds is selling the Scottish Widows Investment Partnership division for 560 million pounds ($908 million). The lender will receive a 9.9 percent stake in Scotland’s largest money manager as part of the deal.
EasyJet Plc (EZJ) jumped 11 percent. Europe’s second-biggest discount airline boosted earnings by 51 percent. Pretax profit for the 12 months to Sept. 30 rose to 478 million pounds from 317 million pounds a year earlier the Luton, England-based carrier said Nov. 19, as it added corporate and leisure customers on routes where network carriers are exiting.
Metro AG (MEO) rallied 8.1 percent. Germany’s biggest retailer may sell a stake in its Russian unit to raise money for expansion, Metro said Nov. 19 in an e-mailed statement. No formal decision has been made, it added.
Sonova Holding AG (SOON) advanced 6.1 percent after predicting that annual earnings before interest, taxes and amortization would grow as much as 14 percent, compared with a previous forecast of 9 percent to 13 percent. The company also reported first-half revenue that beat analysts’ estimates.
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