Friday, September 9, 2011

European Stocks Fall Amid Concern Global Recovery Stalling; Porsche Drops

European stocks slid, with the benchmark Stoxx Europe 600 Index extending its weekly decline, amid concern the global economic recovery is stalling. U.S. futures and Asian shares retreated.

Porsche SE plunged 11 percent after Volkswagen AG (VOW) said it will no longer complete its merger with the carmaker by the end of the year because of pending lawsuits. STMicroelectronics NV (STM) slipped 4.3 percent after Texas Instruments Inc. (TXN) cut its sales forecast. Verbund AG (VER) lost 8.2 percent after forecasting that profit will decline this year.

The Stoxx 600 declined 0.7 percent to 228.98 at 11:44 a.m. in London, extending its weekly drop to 1.8 percent. The gauge has fallen 21 percent from this year’s peak on Feb. 17 as European and U.S. economic reports trailed forecasts, adding to concern that the global economic recovery is at risk. The retreat has left the gauge trading at about 9.5 percent the estimated earnings of its companies, near the lowest valuation since March 2009.

“The economic situation is getting worse,” said Markus Steinbeis, head of equity portfolio management at the Unterfoehring, Germany-based unit of Pioneer Investments KGmbH, which oversees about $221 billion globally. “It depends more than ever on what policy makers will do. As long as economic indicators remain as they are right now and emerging markets are tightening their monetary policies, the upside should be limited.”

The MSCI Asia Pacific Index slipped 0.9 percent, while Standard & Poor’s 500 Index futures expiring in December retreated 0.3 percent. Greece’s ASE Index climbed 2 percent, the only European national benchmark to advance, as the country’s financial shares rallied.

Obama’s Jobs Plan
President Barack Obama challenged the U.S. Congress to pass a $447 billion jobs plan tilted toward the Republican prescription of tax cuts.

The president, addressing a joint session of Congress yesterday, demanded six times that lawmakers act “right away” on a plan to boost spending on infrastructure, stem teacher layoffs and cut in half the payroll taxes paid by workers and small business owners.

International Monetary Fund Managing Director Christine Lagarde said in a speech in London today that governments and policy makers in advanced economies must act to support the recovery as the risk of recession outweighs the threat from inflation.

Christine Lagarde
“Countries must act now -- and act boldly -- to steer their economies through this dangerous new phase of the recovery,” Lagarde said. Monetary policy in advanced economies “should remain highly accommodative,” she said.

A report today showed inflation in Germany, Europe’s largest economy, slowed in August less than initially projected, as energy costs increased. The inflation rate, calculated using a harmonized European Union method, fell to 2.5 percent from 2.6 percent in July, the Federal Statistics Office in Wiesbaden said.

In China, a separate report showed that the country’s inflation eased in August from a three-year high as gains in food prices moderated, giving policy makers more room to pause monetary tightening as the economy cools and a global slowdown threatens exports and jobs.

Consumer prices climbed 6.2 percent from a year earlier, the National Bureau of Statistics said in Beijing today. That matched the 6.2 percent median forecast in a Bloomberg News survey of 31 economists.

Porsche, Volkswagen
Porsche tumbled 11 percent to 39.04 euros, its biggest decline in a month, as Volkswagen, Europe’s largest carmaker, delayed its merger with the maker of the 911 sports car. Volkswagen’s preferred shares fell 0.9 percent to 107 euros.

“From Volkswagen’s perspective, the continuing legal hurdles mean that it is currently impossible to quantify the economic risks of a merger and therefore to perform the valuation of Porsche SE,” the company said. “The main causes of uncertainty are the ongoing proceedings and actions brought against Porsche SE in Germany and the USA for alleged market manipulation.”

Banking shares posted one of the worst performances of the 19 industry groups in the Stoxx 600, retreating 1.9 percent. Societe Generale (GLE) SA plummeted 6.8 percent to 18.18 euros, its lowest price since March 2009. The French bank has fired 40 people in its corporate and investment bank in recent months and held preliminary interviews with a further 10 employees at the start of September, Les Echos reported, citing unidentified union representatives. BNP Paribas (BNP) SA and Barclays Plc (BARC) lost more than 3 percent.

STMicro Shares Slide
STMicroelectronics, Europe’s largest chipmaker, fell 4.3 percent to 4.20 euros. Texas Instruments, the largest maker of analog chips, predicted third-quarter profit of 56 cents to 60 cents a share on revenue of $3.23 billion to $3.37 billion. Analysts on average had estimated profit of 60 cents on sales of $3.5 billion, according to data compiled by Bloomberg.

Verbund sank 8.2 percent to 23.05 euros, its largest drop since 2008. Austria’s biggest power company predicted an operating profit of 780 million euros ($1.08 billion) and net income of 380 million euros, according to a statement late yesterday. Verbund had previously projected the measures would “remain at nearly the same level as in the previous year,” when it had operating profit of 828.5 million euros and net income of 400.8 million euros.

Deutsche Boerse Drops

Deutsche Boerse AG (DB1) slid 2 percent to 40.18 euros after deciding against a compulsory purchase of stock, a so-called squeeze out, from the minority of shareholders who have yet to approve the owner of the Frankfurt Stock Exchange’s combination with NYSE Euronext.

“The expectation of a squeeze out happening in the near term has receded,” said Richard Perrott, exchange analyst at Berenberg Bank AG in London. “That has been underpinning the Deutsche Boerse stock.”

Admiral Group Plc (ADM), a British motor insurer, slumped 5.2 percent to 1,293 pence as the U.K.’s Ministry of Justice said it would ban so-called referral fees in personal-injury cases to help stem rising insurance costs.

Societe Television Francaise 1 (TFI) sank 6.8 percent to 9.59 euros, its lowest price in more than two years, as the operator of the TF1 channel was downgraded to “neutral” from “overweight” at JPMorgan Chase & Co.

Veolia, Tecnicas Reunidas
Veolia Environnement SA (VIE) lost 3.8 percent to 10.45 euros as the world’s biggest water company was rated “underweight” in resumed coverage at Morgan Stanley.

Tecnicas Reunidas SA (TRE), a Spanish provider of engineering and construction services to the energy industry, retreated 3.5 percent to 25.58 euros after Goldman Sachs Group Inc. recommended selling the shares in new coverage.

Bayer AG (BAYN) jumped 2.6 percent to 39.97 euros as Johnson & Johnson and Bayer’s blood thinner Xarelto won an advisory panel’s support as a treatment to prevent strokes for patients with the most common abnormal heart rhythm.

Tullow Oil Plc (TLW) surged 12 percent to 1,371 pence, the largest gains in 2 1/2 years, as the U.K. explorer behind west Africa’s biggest offshore discovery in a decade made an offshore find in French Guiana.

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