European Stocks Drop for a Second Day as Carmakers Slide

European stocks retreated for a second day as carmakers dropped, outweighing gains by companies from LVMH Moet Hennessy Louis Vuitton SA to Kering SA that reported faster quarterly sales growth.

Daimler AG slid 2.3 percent, leading carmakers lower. ThyssenKrupp AG dropped 2.9 percent amid concern it has failed to make progress in talks to sell its plants in the Americas. LVMH, which owns Louis Vuitton and Christian Dior, rallied 3.6 percent. Kering, the owner of Gucci, advanced 3.9 percent.

The Stoxx Europe 600 Index dropped 0.2 percent to 298.91 at the close of trading, erasing a gain of as much as 0.7 percent. The equity benchmark has lost 0.3 percent this week. It has rallied 4.9 percent this month as the Federal Reserve said its stimulus program remained flexible.

“I’m not sure markets have more scope to rally on a very short-term basis,” said Pierre Mouton, who helps oversee $6 billion as a portfolio manager at Notz, Stucki & Cie. in Geneva. “On earnings, markets seem to appreciate what has been published on average. Not everything is rosy but there’s some optimism in Europe.”

The Stoxx 600 has still rallied 19 percent since European Central Bank President Mario Draghi pledged on July 26 last year to save the euro. Yields on Spanish 10-year bonds have fallen to 4.62 percent from 7.38 percent on the day before Draghi’s speech, and the country’s IBEX 35 stock index has surged 39 percent. Italian 10-year bond yields have dropped to 4.40 percent from 6.45 percent, while the benchmark FTSEMIB Index has rallied 31 percent in the past year.

Draghi Rally

“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro,” Draghi had said in a speech in London. “And believe me, it will be enough.”

National benchmark indexes declined in 11 of the 18 western-European markets. The U.K.’s FTSE 100 retreated 0.5 percent, while Germany’s DAX declined 0.7 percent. France’s CAC 40 increased 0.3 percent.

A gauge of auto-industry shares fell 1.1 percent for the worst performance among 19 industry groups on the Stoxx 600.

Daimler slid 2.3 percent to 52.30 euros. PSA Peugeot Citroen lost 1.8 percent to 8.42 euros. Continental AG declined 1.4 percent to 116.30 euros after M.M. Warburg & Co. downgraded the shares to hold from buy. The brokerage said the German tiremaker may not meet its target of growing sales by 5 percent because of weaker-than-forecast demand for replacement tires.

ThyssenKrupp lost 2.9 percent to 16.85 euros as spokesman Stefan Ettwig said Germany’s largest steelmaker remains in talks with a bidder for its Steel Americas business. ThyssenKrupp has failed to reach a deal with Brazil’s Cia Siderurgica Nacional SA, the Wall Street Journal reported yesterday.

Deutsche Boerse

Deutsche Boerse AG lost 3.7 percent to 52.43 euros after the operator of the Frankfurt stock exchange said second-quarter profit fell 8.2 percent to 171 million euros ($227 million).

“For the remainder of the financial year 2013, Deutsche Boerse expects to see a slight deterioration compared with the forecasts for its operating environment made in its 2012 consolidated financial statements,” the company said.

Rexel SA declined 3.1 percent to 18.22 euros after the French electrical-equipment distributor said second-quarter net income halved. It also raised its estimated restructuring cost for 2013 to 60 million euros and 70 million euros. It had forecast 45 million euros to 50 million euros.

LVMH, Kering

LVMH jumped 3.6 percent to 135.05 euros, its biggest rally since October, after the world’s largest maker of luxury goods said organic revenue increased 9 percent in the second quarter, faster than the 7 percent gain in the first quarter.

Kering rose 3.9 percent to 177.50 euros as the company formerly known as PPR said luxury sales climbed 9.4 percent, exceeding the previous quarter’s 6.4 percent increase.

Belgacom SA rallied 9.1 percent to 18.34 euros, its biggest gain since at least 2004, after reporting second-quarter earnings before interest, taxes, depreciation, amortization and some items of 430 million euros. Analysts on average had estimated Ebitda of 414.2 million euros.

Pearson Plc surged 6.2 percent to 1,329 pence, its highest price since 2001. The publisher of the Financial Times newspaper posted first-half sales of 2.76 billion pounds ($4.2 billion), exceeding the 2.69 billion pounds estimated by analysts in a Bloomberg survey.