European Stocks Decline as German Output Data DisappointInyoung Hwang
European stocks slid to a seven-week low as a report showed German industrial production contracted the most in more than five years, and the International Monetary Fund cut its outlook for global growth.
Travel and health-care companies led declines on the Stoxx Europe 600 Index. Schroders Plc lost 2.3 percent after Bank of America Corp. recommended investors sell shares of the asset manager. Rio Tinto Group gained after saying it rejected a merger offer from Glencore Plc.
The Stoxx 600 fell 1.5 percent to 330.85 at the close of trading, extending losses after the IMF release. The gauge rose yesterday, paring gains in the final hour of trading, following a two-week drop driven by concern that the European Central Bank’s asset-buying plan won’t be enough to boost inflation and revive the region’s economy. The index has fallen 5.4 percent from its highest level in more than six years reached in June.
“The current environment is shaky for equity markets because the latest economic indicators have all been on the weak side,” Gerhard Schwarz, the Munich-based head of equity strategy at Baader Bank AG, said by telephone. “For a region like the euro zone, investors are going to be particularly sensitive to weakness. This is very true ahead of earnings season. We haven’t too many profit warnings and investors are fearing bad news that has shown up in economic indicators will sooner or later have to show up in earnings disappointments.”
German production, adjusted for seasonal swings, dropped 4 percent in August from July, when it expanded 1.6 percent, the Economy Ministry in Berlin said. That’s the biggest decline since January 2009 and compares with a median estimate of a 1.5 percent contraction in a Bloomberg News survey.
The world economy will grow 3.8 percent next year, compared with a July forecast for 4 percent, after a 3.3 percent expansion this year, the Washington-based IMF said. U.S. growth is helping lead a worldwide acceleration that’s weaker than the fund predicted 2 1/2 months ago as the outlooks for the euro area, Brazil, Russia and Japan deteriorate.
The IMF also warned that a sustained period of policy interest rates near zero in advanced economies has raised the risk that some financial markets may be overheating.
National benchmark indexes fell in 17 of 18 western-European markets today. Germany’s DAX Index lost 1.3 percent, France’s CAC 40 Index slid 1.8 percent, and the U.K.’s FTSE 100 Index dropped 1 percent.
The volume of shares changing hands in Stoxx 600-listed companies was 18 percent greater than the 30-day average today, data compiled by Bloomberg show.
In the U.S., aluminum producer Alcoa Inc. unofficially kicks off the reporting season after the close of trading tomorrow. Investors are also awaiting minutes from the Federal Reserve’s last meeting, which will be published the same day.
All 19 groups in the Stoxx 600 retreated today. An index of travel-related stocks slid the most amid concern over the possible spread of Ebola after a nursing assistant in Spain became the first person outside Africa to be diagnosed with the viral illness.
EasyJet Plc fell 5.3 percent to 1,389 pence. International Consolidated Airlines Group SA, which includes the Spanish carrier Iberia, dropped 6.9 percent to 345.6 pence.
Morgan Stanley cut its rating on European health companies to underweight, similar to a sell, saying valuations are stretched. Qiagen NV, which makes diagnostic tools for medical treatments, slipped 1.3 percent to 17.85 euros. Shire Plc fell 2.5 percent to 5,295 pence.
Schroders lost 2.3 percent to 2,296 pence. Bank of America’s Merrill Lynch cut its rating on the London-based company to underperform, the equivalent of a sell, from a buy. The bank said profitability may be reduced by as much as 20 percent if European Securities and Markets Authority proposals, including banning the use of dealing commissions to pay for research, are implemented.
Deutsche Bank AG slipped 2.3 percent to 26.57 euros. The New York Times reported U.S. prosecutors are discussing whether to press the German lender to plead guilty to interest-rate rigging charges. Authorities haven’t yet made a final decision, according to the newspaper, which cited unidentified lawyers briefed on the matter.
Rio Tinto added 0.8 percent to 3,020.5 pence, paring earlier gains of as much as 6.2 percent. Glencore made a merger proposal in July, which London-based Rio said its board unanimously rejected. Glencore has since reached out to Rio’s biggest investor, Aluminum Corp. of China, to gauge its interest in a potential deal in the next year, according to people familiar with the matter.
Glencore slipped 2.5 percent to 331.1 pence. The Baar, Switzerland-based company said today that it is now barred, in most circumstances, from making a renewed bid for six months under the U.K. takeover code.
Cairn Energy Plc advanced 2 percent to 183.5 pence. The Scottish oil explorer said it has discovered oil at its FAN-1 well, offshore Senegal.
Tesco Plc increased 3.3 percent to 182.6 pence. The largest British grocer has asked its commercial director Kevin Grace to step aside, the Financial Times’ Andrea Felsted said in a Twitter post.