European Stocks Drop on BOE Comments; Natixis SlidesSofia Horta e Costa
European stocks fell as the Bank of England said it won’t raise interest rates or reduce bond purchases until the U.K.’s jobless rate falls to 7 percent, sparking concern it expects the economic recovery to be slow.
Natixis SA dropped the most in six months after posting a 29 percent decline in second-quarter net income. Rexel SA lost 4.2 percent after its largest shareholder sold a 10 percent stake. Randgold Resources Ltd. led mining stocks lower after reporting a slump in sales and earnings. ING Groep NV surged to a two-year high after quarterly pretax profit rose.
The Stoxx Europe 600 Index declined 0.2 percent to 302.81 at the close of trading, as Bank of England Governor Mark Carney said the U.K. economy hasn’t reached “escape velocity.” The benchmark gauge has rallied 9.9 percent since June 24 as the Federal Reserve, the European Central Bank and the Bank of England pledged to continue stimulus.
“It looks like rates are not going to rise in the next three years, though they could, as Carney has stressed they are not pre-committed,” Marc Ostwald, a strategist at Monument Securities in London, wrote in an e-mail. “This is a rather valueless bit of forward guidance as is the case with the ECB. Where is the evidence that there is a stable relationship between U.K. unemployment and U.K. inflation trends?”
The Bank of England said it will seek not to raise its benchmark interest rate or reduce bond purchases until the U.K.’s unemployment rate falls to 7 percent, linking stimulus measures to a threshold for the first time. The unemployment rate was at 7.8 percent in the quarter through May and the BOE expects it will stay above 7 percent at least until the third quarter of 2016.
The BOE’s Monetary Policy Committee last week voted to maintain the bank rate at 0.5 percent, the level it has been held at since March 2009, and the stock of asset purchases at 375 billion pounds ($580 billion).
In the U.S., Fed Bank of Chicago President Charles Evans, a proponent of monetary stimulus, said late yesterday he would not rule out a decision to reduce bond purchases from September.
Fed Bank of Dallas President Richard Fisher, one of the most vocal critics of quantitative easing, said Aug. 5 that policy makers were “closer to execution mode” in considering the right time to begin reducing purchases.
National benchmark indexes retreated in 11 of the 18 western-European markets. The U.K.’s FTSE 100 slipped 1.4 percent, while Germany’s DAX Index lost 0.5 percent. France’s CAC 40 rose 0.2 percent.
Natixis declined 3.8 percent to 3.79 euros, its biggest decrease since Feb. 4. Quarterly net income on a pro-forma basis dropped to 248 million euros ($330 million). The bank took a 20 million-euro charge on its debt, after booking a 91 million-euro gain in the year-earlier period.
Rexel slid 4.2 percent to 18.15 euros. Ray Investment SARL sold 28.8 million shares at 18.25 euros each in the electrical-equipment distributor, according to a personal familiar with the sale. Ray Investment now holds 60.8 million shares, or more than 21 percent, in the company.
A gauge of mining companies declined for a second day as Australia’s highest court upheld the country’s tax on iron-ore and coal profits, dismissing a challenge from Fortescue Metals Group Ltd. and state governments.
Randgold Resources retreated 1.4 percent to 4,366 pence. The gold producer said second-quarter profit slumped 61 percent from a year earlier to $46.3 million, while sales declined 27 percent to $252.8 million.
Rio Tinto Group fell 1.5 percent 2,953.5 pence. The commodity producer lost three bidders for its iron-ore unit in Canada after offers came below the company’s expectations, Reuters reported, citing people familiar with the matter.
Andritz AG tumbled 7.9 percent to 39.10 euros, for its largest decline in three months. The Austrian maker of hydro-power turbines posted second-quarter profit that missed estimates and said full-year earnings will drop.
ING, which received a 10 billion-euro government bailout in 2008, gained 5.1 percent to 8.26 euros. Underlying pretax profit for the banking unit rose 14 percent to 1.15 billion euros in the second quarter as the interest margin improved and cost cuts paid off, the biggest Dutch financial-services company said.
Securitas AB climbed 8.4 percent to 70.50 kronor, its largest increase since October 2008. The seven-day rally also marked its longest winning streak since March 2011. The security provider posted net income of 461 million kronor ($70 million) in the second quarter, exceeding the average analyst estimate of 437 million kronor.