European Stocks Drop Amid Concern Over Fed Stimulus Cuts
European stocks fell, snapping two days of gains, before a Federal Reserve meeting next week that may give clues on when it will reduce its stimulus.
Gauges of auto and technology companies led the losses, each falling more than 1.1 percent. Royal Vopak NV lost 2.1 percent after saying it may miss its 2016 earnings forecast. Victrex Plc (VCT) jumped 4.2 percent after proposing a final dividend that exceeded forecasts. CGG SA advanced 2.3 percent after Raymond James Financial Inc. recommended buying the stock.
The Stoxx Europe 600 Index lost 0.7 percent to 314.91 at the close of trading in London. The equity gauge has dropped 3.2 percent this month as better-than-forecast U.S. economic data fueled speculation the Fed will taper stimulus measures sooner than expected. The European stocks gauge has still rallied 13 percent this year.
“The downside risk to equities would be a very hawkish Fed next week,” said Pierre Mouton, who helps oversee $6 billion as a portfolio manager at Notz, Stucki & Cie. in Geneva. “We think that the U.S. economy will prove much stronger than expected. On one hand, it is very good for equities, and on the other hand, it adds pressure to push interest rates higher, which in the short run could be damageable for stocks.”
The Federal Open Market Committee will probably start slowing its $85 billion in monthly bond purchases at its Dec. 17-18 meeting, according to 34 percent of economists surveyed Dec. 6 by Bloomberg, an increase from 17 percent in a Nov. 8 survey. The central bank has said it may reduce its stimulus if the economy improves as forecast.
The U.S. Congress has until Dec. 13 to reach a deal to reduce automatic spending cuts and break a three-year stretch of failed fiscal talks in Washington. Representative Steny Hoyer, the No. 2 House Democrat, said in an interview on CNBC today that he doesn’t like what he has heard about the budget deal.
China’s factory production rose 10 percent in November from a year earlier, following a 10.3 percent gain in October, according to the National Bureau of Statistics. That missed analysts’ median projection of 10.1 percent in a Bloomberg survey. Retail sales advanced 13.7 percent.
Industrial production in the U.K. increased 0.4 percent in October from the previous month, the Office for National Statistics said. It climbed 0.9 percent in September. The October gain matched economists’ estimates.
Gauges of auto companies and technology shares posted the biggest declines among 19 industry groups in the Stoxx 600. PSA Peugeot Citroen lost 5.1 percent to 11.61 euros and Nokia Oyj dropped 2.4 percent to 5.77 euros.
Vopak slipped 2.1 percent to 41.74 euros after saying it probably won’t reach its goal of 1 billion euros ($1.37 billion) in earnings before interest, taxes, depreciation and amortization in 2016, citing a lack of clarity on the timing of new, profitable projects. The world’s biggest chemical- and oil-storage company forecasts 2013 Ebitda excluding one-time items of about 750 million euros.
Victrex surged 4.2 percent to 1,631 pence. The U.K. maker of heat-resistant plastics for auto, energy and health-care companies proposed a final dividend of 32.65 pence, surpassing the Bloomberg Dividend forecast of 31 pence. Victrex said in a preliminary report full-year revenue rose to 221.9 million pounds ($364.5 million), compared with the average analyst estimate of 221.8 million pounds.
CGG climbed 2.3 percent to 14.67 euros. Raymond James Financial Inc. raised its recommendation on the world’s biggest seismic surveyor of oilfields to outperform, similar to buy, from market perform. The brokerage cited marine contracts that CGG won and the potential for client works in Brazil.
“The worst is over,” analyst Bertrand Hodee wrote in a note. The stock tumbled 25 percent from a Sept. 13 high through yesterday and reached a two-year low on Dec. 5. CGG last month cut its full-year sales forecast, citing a temporary weakening in demand.
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