Europe Stocks Slide 11% From June High as Data Disappoint

European stocks fell the most in almost three years, taking their decline from a June high to 11 percent, as Shire Plc led health-care companies lower, while investors weighed earnings and worse-than-forecast U.S. retail-sales and manufacturing data.

Shire sank the most in more than 12 years as AbbVie Inc. reconsiders the 32.4 billion-pound ($51.6 billion) purchase of the U.K. drugmaker amid new U.S. tax laws. Greek and Italian lenders led bank stocks lower. Petroleum Geo-Services ASA slid 3.9 percent after lowering its annual-profit forecast.

The Stoxx Europe 600 Index dropped 3.2 percent to 311.36 at the close of trading, falling for a seventh day, its longest losing streak since 2011. The equity gauge has retreated 7.3 percent since Oct. 6 as the International Monetary Fund cut its global-growth forecasts, and German industrial production and investor confidence declined. The Euro Stoxx 50 Index has fallen 13 percent from its June high.

“Sentiment is extremely weak at the moment,” Guy Foster, head of research at Brewin Dolphin Securities Ltd., said by phone from London. His firm manages about $46 billion. “The negative sentiment seems to be driving an overreaction in stock-specific news, as with Shire. With the tax benefits eroded, it looks like AbbVie may be seeking a lower price for Shire. We’re not going into the European earnings season with a great deal of excitement and optimism. Earnings data does seem to be mixed.”

U.S. Data

Retail sales in the U.S. dropped in September more than forecast. The 0.3 percent decrease followed a 0.6 percent August gain, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg called for a 0.1 percent drop.

The New York Fed’s Empire State Factory Index fell to 6.17 in October, below estimates for 20.25.

“The U.S. retail sales were disappointing,” Peter Dixon, global equities economist at Commerzbank AG in London, said by phone. “Core retail sales took a hit, which seems to be the main cause for concern. Global investors are very sensitive to data misses that add to signs of slowing global growth. When the U.S. is flashing red, the kneejerk reaction is to sell off.”

The Federal Reserve releases its Beige Book report of regional anecdotal information about the U.S. economy after European markets close today.

National benchmark indexes retreated in all 18 western European markets. Germany’s DAX Index fell 2.9 percent, France’s CAC 40 Index retreated 3.6 percent, and the U.K.’s FTSE 100 Index dropped 2.8 percent.

Greece’s ASE Index slid 6.3 percent, its biggest decline in almost two years, amid concern the government won’t be able to fund itself adequately if it leaves its international rescue program early.

Shire Plummets

Shire tumbled 22 percent to 4,012 pence. AbbVie, which announced in July a plan to buy Dublin-based Shire and move its legal address abroad, said its board of directors will meet Oct. 20 to consider the impact of changes to U.S. tax rules on the financial benefits of the deal.

A gauge of health-care stocks posted the second-worst performance of the 19 industry groups in the Stoxx 600 as other companies seen as tax-friendly takeover targets also fell.

AstraZeneca Plc, the target of a failed bid by Pfizer Inc. in May, dropped 3.2 percent to 4,264.5 pence. Smith & Nephew, which Stryker Corp. had evaluated as a takeover target, lost 5.4 percent to 921.5 pence.

A measure of bank-related stocks posted the biggest decline on the Stoxx 600. Greek and Italian lenders led the retreat, with National Bank of Greece SA tumbling 11 percent to 1.85 euros, and Banco Popolare SC falling 8.1 percent to 10.57 euros.

Petroleum Geo-Services ASA slid 3.9 percent to 36.90 kroner after estimating full-year earnings before interest, taxes, depreciation and amortization of about $725 million. That’s lower than its July forecast of $850 million. The company cited deteriorating market conditions, including weaker oil prices.

Balfour Beatty Plc advanced 5.3 percent to 156.5 pence after naming Leo Quinn as its new chief executive officer from Jan. 1. Qinetiq Group Plc, where Quinn has been CEO for five years, tumbled 12 percent to 193 pence.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE