Europe Stocks Little Changed as U.S. Shutdown ContinuesSofia Horta e Costa
European stocks were little changed, falling for a second consecutive week, as negotiations between U.S. lawmakers on the federal budget and debt limit dragged into a fourth day.
Nokian Renkaat Oyj slid the most in almost a year after the Finnish tiremaker cut its profit and sales forecasts for 2013 because of weaker demand in Russia and the decline of the ruble against the euro. Voestalpine AG lost 2.3 percent as Citigroup Inc. cut its rating on the steelmaker. Lindt & Spruengli AG jumped to its highest price since 2007 after saying it will buy back shares worth about 450 million Swiss francs ($498 million).
The Stoxx Europe 600 Index rose 0.1 percent to 309.89 at the close of trading. The equity gauge slipped 0.7 percent this week amid investor concern about the U.S. budget talks, trimming its gains in 2013 to 11 percent. The measure has fallen 1.6 percent since reaching its highest level in more than five years on Sept. 19.
“With every day that passes without a solution, people are getting more nervous,” Tobias Britsch, who helps overseee about $35 billion at Meriten Investment Management GmbH, said by phone from Dusseldorf, Germany. “The economic recovery in the U.S. is not that strong and the impact of the shutdown globally should not be underestimated. If 800,000 people are not going into work, that will hit consumer confidence in an economy which is very driven by the consumer.”
The number of shares trading hands in Stoxx 600-listed companies was 13 percent greater than the average of the past 30 sessions, data compiled by Bloomberg showed.
In the U.S., as many as 800,000 federal employees remain temporarily out of work as lawmakers wrangle over the budget for the new financial year, which started Oct. 1. A monthly jobs report due today was delayed.
Congress also faces a dispute over raising the $16.7 trillion debt ceiling this month. The Treasury has said that it will exhaust measures to avoid exceeding the borrowing limit on Oct. 17. If that happens, the government would run out of cash to pay all of its bills at some point between Oct. 22 and Oct. 31, according to the Congressional Budget Office.
House Speaker John Boehner told reporters today that the way to reopen the partially shut government is for Democrats to negotiate with him and accept changes that would produce “fairness” under the Affordable Care Act.
The Ohio Republican also said he doesn’t want the U.S. to default on its debt.
The Treasury Department said yesterday that a federal default could lead to a recession comparable to the 2008 financial crisis or worse. Separately, International Monetary Fund Managing Director Christine Lagarde said in a speech in Washington that it’s “mission-critical” for the U.S. to raise the borrowing limit as a default would damage the world economy.
“The main focus is the debt ceiling debate but the risk of default is very small because the consequences are so severe,” Graham Bishop, the London-based senior equity strategist at Exane BNP Paribas, said in an interview.
Standard & Poor’s stripped the U.S. of its AAA credit rating in August 2011 amid a similar stalemate between Obama and Congress over whether to raise the debt ceiling, and the S&P 500 fell more than 11 percent in three days.
The losses were later reversed, as the Federal Reserve pledged to hold the benchmark interest rate near zero and maintain bond purchases to support the economy. The S&P 500 gained 25 percent in the 12 months through August 2012.
Investors are watching Fed officials today for indications of when policy makers will begin paring the bond-buying program.
Fed Bank of Dallas President Richard Fisher reiterated in a speech in Little Rock, Arkansas, that he wanted stimulus tapering to begin in September. Fed Bank of Minneapolis President Narayana Kocherlakota speaks on monetary policy after the close of European trading in Minnesota.
National benchmark indexes gained in 13 of the 18 western European markets. The U.K’s FTSE 100 added 0.1 percent, France’s CAC 40 rose 0.9 percent and Germany’s DAX increased 0.3 percent.
Nokian Renkaat slumped 7.6 percent to 34.69 euros. Operating profit and net sales will fall this year from 2012, the company said in a statement today. That compares to an August prediction that sales and profit could increase in the full-year.
Voestalpine slipped 2.3 percent to 34.67 euros in Vienna. Citigroup cut its recommendation to neutral from buy, saying the stock is expensive after rallying more than 50 percent since April 18. The brokerage also cut its rating on the European steel sector to underweight, similar to sell, saying hopes the industry will emerge from its current weakness are unfounded.
Italy’s FTSE MIB climbed 1.6 percent as a Senate panel recommended Silvio Berlusconi’s expulsion from the upper house because of his conviction for tax fraud. The recommendation must still be put before the Senate for a final vote. Banks led gains in Italy, with UniCredit SpA rising 3.4 percent to 5.23 euros, its highest price since December 2011, and Mediobanca SpA advancing 4.4 percent to 5.91 euros.
Lindt climbed 3.6 percent to 44,430 francs after the world’s largest premium chocolate maker said it will begin purchasing shares at the end of this month until the end of 2014, while maintaining its current dividend policy.
Deutsche Lufthansa AG rose 2.1 percent to 14.41 euros. Europe’s second-largest airline said operating losses at its Germanwings discount carrier will fall by 90 million euros ($122 million) this year. In a statement on its website late yesterday, Lufthansa also said that costs for upgrading cabins and lounges will exceed 500 million euros through 2015.