European Stocks Decline Amid U.S. Budget, Debt GridlockJonathan Morgan
European stocks declined to a one-month low amid concern that the impasse over the U.S. budget and debt limit may lead to a default.
Alcatel-Lucent SA slid 6.9 percent after French Prime Minister Jean-Marc Ayrault said the network-equipment maker’s restructuring plans won’t be approved without an agreement limiting job cuts. Cie. de Saint-Gobain SA fell 3.7 percent as Morgan Stanley cut its rating on Europe’s biggest supplier of building materials. Taylor Wimpey Plc rose 5.2 percent as Goldman Sachs Group Inc. added it to a conviction buy list.
The Stoxx Europe 600 Index slipped 0.6 percent to 305.13 at the close of trading, for a third day of losses. The benchmark has fallen 1.5 percent this week after U.S. House Speaker John Boehner said he will attach conditions before backing a bill to raise the federal borrowing limit and as the first shutdown of the federal government in 17 years continues.
“Investors’ patience with U.S. politicians changed,” Henrik Drusebjerg, who helps oversee $220 billion as a senior strategist at Nordea Bank AB in Copenhagen, said by telephone. “Faith has been diminished. Whatever comments we get from the negotiations, they don’t seem to be any closer to a political solution.”
President Barack Obama said yesterday that the U.S. economy risks a “very deep recession” if Congress doesn’t raise the debt ceiling. He spoke after calling Boehner to “reiterate that he won’t negotiate on a government-funding bill or debt-limit increase,” said Brendan Buck, a Boehner spokesman.
Still, lawmakers began taking the first tentative steps toward a path to raising the limit even as the rhetoric grew more divisive. Senate Democrats plan a test vote before the end of this week on a measure that would grant Obama authority to raise the ceiling, probably for a year, unless two-thirds of both chambers of Congress oppose.
The Treasury has said that it will exhaust measures to avoid exceeding the borrowing limit on Oct. 17. If that happens, the government will 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.
“The shutdown overshadows all other topics,” Soeren Steinert, who helps manage about $24 billion as associate director for equities trading at Quoniam Asset Management GmbH in Frankfurt, wrote in an e-mail. “Fear is increasing every day a little more because of a possible U.S. default and that hits sentiment. Markets are listening to every small comment from Democrats and Republicans and uncertainty is very high.”
Obama will nominate Janet Yellen as chairman of the Federal Reserve, which would put the world’s most powerful central bank in the hands of a key architect of its unprecedented stimulus program and the first female leader in its 100-year history.
Obama will announce the nomination at 3 p.m. today in Washington, a White House official said in an e-mailed statement. Yellen, 67, would succeed Ben S. Bernanke, whose term expires on Jan. 31.
Alcoa Inc., the largest U.S. aluminum producer, reported better-than-expected quarterly earnings yesterday after its smelting business returned to profitability and results improved at a unit that makes auto and aerospace parts.
National benchmark indexes retreated in 13 of the 18 western European markets. The U.K’s FTSE 100 slipped 0.4 percent, France’s CAC 40 fell 0.2 percent and Germany’s DAX lost 0.5 percent.
The volume of shares changing hands in Stoxx 600-listed companies was 19 percent higher than the 30-day average, data compiled by Bloomberg show.
Alcatel-Lucent slid 6.9 percent to 2.58 euros, its biggest drop since Jan. 8. Ayrault said he wanted negotiations to limit job cuts. “If there is no accord, this restructuring won’t be approved,” he said on Europe1 radio.
Alcatel said on Oct. 8 that it will eliminate 10,000 jobs as Chief Executive Officer Michel Combes accelerates a 1 billion-euro ($1.4 billion) cost-cut plan to revive the unprofitable company.
Saint-Gobain dropped 3.7 percent to 36.87 euros. Morgan Stanley cut its rating on the stock to underweight, similar to a sell recommendation, from equal weight, saying it doesn’t see a recovery yet in the European building industry and the contribution from emerging markets will slow.
Vedanta Resources Plc slid 4.7 percent to 1,020 pence, its lowest price in three months. The India-focused metals and oil producer said fiscal second-quarter copper output in Zambia declined 26 percent and iron-ore mining in Karnataka state remains halted.
Celesio AG lost 2.6 percent to 19.96 euros. Commerzbank AG downgraded the drug wholesaler to hold from buy, citing the risk that its majority shareholder, Franz Haniel & Cie GmbH, may not allow McKesson Corp. to gain control of the business. Celesio jumped 20 percent yesterday as Dow Jones reported that McKesson has started talks with Franz Haniel about acquiring the company.
EDP-Energias de Portugal SA, the nation’s biggest utility, slipped 2.1 percent to 2.47 euros after Goldman put the company on its conviction-sell list.
Wimpey advanced 5.2 percent to 103.8 pence. Goldman added the U.K.’s second-largest homebuilder by volume to its conviction buy list, citing its exposure to the domestic housing-market recovery.
Telecom Italia SpA jumped 6.2 percent to 65.6 euro cents. The phone company that was stripped of its investment-grade rating is seeking at least 9 billion euros for its controlling stake in Brazilian wireless carrier Tim Participacoes SA, according to a person with direct knowledge of the matter.