In Europe: Stocks Drop for Second Day; UBS Falls

7 February 2012


All ‘Greece’d’ out? Markets grow weary as ‘sovereign-debt crisis deepens.’

European stocks slid for a second day as Greek talks on measures needed to get a second bailout continued and China said industrialgrowth may slow. Asian shares were little changed while U.S. index futures dropped.

Bayerische Motoren Werke AG (BMW) and Rio Tinto Group led carmakers and mining companies lower. LVMH Moet Hennessy Louis Vuitton SA (MC) lost 3.6 percent after three Bulgari directors sold a 558 million-euro ($733 million) stake. Swatch Group AG (UHR), the world’s biggest watchmaker, declined 4.4 percent as profit trailed projections. ArcelorMittal and Yara International ASA (YAR) rose more than 1.5 percent after reporting earnings.

The Stoxx Europe 600 Index declined 0.7 percent to 262.33 at 12:38 p.m. in London. The gauge has still advanced 7.3 percent this year amid optimism that the euro area will contain its sovereign-debt crisis and that the economic recovery in the U.S. remains intact. The MSCI Asia Pacific Index added less than 0.1 percent today while Standard & Poor’s 500 Index futures expiring in March fell 0.3 percent.

“The Greek tragedy dominates the headlines,” Viola Stork, an analyst at Helaba Landesbank Hessen-Thueringen in Frankfurt, wrote in a report today. “Unsuccessful consultations between the local government and the parties on the necessary austerity measures cause increasing fear of a default.”

Greek Talks

Greek Prime Minister Lucas Papademos is convening the nation’s political leaders to seek consensus on the cuts required for another European Union-led bailout.

They have already agreed to make further cuts this year equal to 1.5 percent of gross domestic product, they have yet to decide how to recapitalize banks, ensure the viability of pension funds and reduce wages to increase the economy’s competitiveness.

China’s industrial output growth will probably slow this quarter as the world economy cools and the euro area’s crisis worsens, the Ministry of Industry and Information Technology said today.

“The global economy is slowing down, Europe’s sovereign- debt crisis is deepening and the downside risks to the world economy are rising with international demand still slack and global commodities and financial markets continuing to be volatile,” the ministry said.

German industrial output unexpectedly dropped the most in three years in December as Europe’s debt crisis weighed on confidence and the global economic slowdown damped demand. Production fell 2.9 percent from November, when it stagnated, the Economy Ministry in Berlin said today. Economists had expected output to remain unchanged, according to the median of 41 forecasts in a Bloomberg News survey.

Automakers Fall

BMW, the world’s biggest maker of luxury cars, slid 3 percent to 68.62 euros, snapping a five-day advance, and Renault SA (RNO) retreated 3.7 percent to 36.70 euros. Automakers were the worst performing group of 19 industries in the Stoxx 600 today.

Rio Tinto, the world’s third-largest mining company, fell 2.4 percent to 3,853 pence and Eurasian Natural Resources Corp. dropped 3.7 percent to 694.5 pence.

LVMH lost 3.6 percent to 124.05 euros after shareholders Paolo Bulgari, Nicola Bulgari and Francesco Trapani sold a 558 million-euro stake in the world’s largest maker of luxury goods.

Swatch declined 4.4 percent to 396.50 Swiss francs after reporting 2011 operating profit of 1.61 billion francs ($1.75 billion), missing the average projection in a Bloomberg survey of 1.67 billion francs. Cie. Financiere Richemont SA, the owner of the Cartier brand, fell 3.2 percent to 53.55 francs.

Burberry, Dior

Luxury shares fell. Burberry Group Plc (BRBY) lost 4 percent to 1,388 pence and Christian Dior SA (CDI) slid 3.8 percent to 110.10 euros. Hermes International (RMS) SCA, the French maker of Birkin bags and silk scarves, dropped 2.5 percent to 269.95 euros.

Xstrata Plc (XTA), the largest exporter of power-station coal, retreated 3.6 percent to 1,216.5 pence. Glencore International Plc slipped 3.1 percent to 446.3 pence after it agreed to buy the company for 39.1 billion pounds ($62 billion) in the biggest mining takeover.

Standard Life Investments Ltd. said it plans to vote against the proposed merger, as it “clearly undervalues Xstrata’s assets and future earnings contribution,” according to David Cumming, head of equities at Standard Life.

Xstrata reported 2011 earnings before interest, taxes, depreciation and amortization of $11.6 billion, up from $10.4 billion a year earlier. That trailed the $11.5 billion median estimate of analysts surveyed by Bloomberg.

ArcelorMittal Advances

ArcelorMittal (MT), the world’s biggest steelmaker, gained 1.8 percent to 16.45 euros after reporting fourth-quarter Earnings before interest, taxes, depreciation and amortization of $1.71 billion, beating the average analyst estimate of $1.68 billion. The company also forecast that first-half earnings will exceed the previous six months.

Yara International rose 2.4 percent to 263.70 kroner. The largest maker of nitrogen fertilizers posted fourth-quarter net income of 3.39 billion kroner ($584 million), topping the average analyst estimate of 2.98 billion kroner.

Novo Nordisk A/S, the world’s biggest insulin maker, increased 2.9 percent to 757.50 kroner, its highest price since at least 1991, and Shire Plc (SHP) jumped 4.7 percent to 2,230 pence. Keyur Parekh, an analyst at Goldman Sachs Group Inc., said the two companies are among the best positioned stocks in pharmaceuticals.

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