European stocks slumped, paring the biggest weekly rally on the Stoxx Europe 600 Index since July, as a report showed the U.S. economy added no jobs last month and the unemployment rate held at 9.1 percent.
AstraZeneca Plc (AZN) slumped 3.6 percent after the drugmaker reported study results for its Crestor treatment. Carmakers and construction companies led declines among industry groups with profits most tied to economic growth. Straumann Holding AG (STMN), the world’s biggest maker of dental implants, slid 5.9 percent after Goldman Sachs Group Inc. advised selling the shares.
The Stoxx 600 sank 2.4 percent to 233.3 at 2:01 p.m. in London. The gauge has still rallied 3.5 percent this week, its biggest weekly jump since July, as investors speculated the rout which had left the gauge trading at as little as 9.1 times its estimated earnings wasn’t commensurate with the prospect for profit growth.
“For the stock markets, this highlights the high uncertainty we’re facing,” said Espen Furnes, an Oslo-based fund manager at Storebrand Asset Management, which oversees $74 billion. “The economic recovery in the U.S. is still weak and vulnerable.”
The measure declined 10 percent in August, its largest monthly retreat since October 2008, amid concern global economic growth is slowing as Europe’s sovereign-debt crisis spread. The gauge has traded at an average multiple of 12.1 over the past five years.
U.S. Unemployment Rate
Stocks extended their losses today after a Labor Department report showed that the U.S. unemployment rate remained unchanged at 9.1 percent in August. The release also showed that the world’s largest economy added no jobs last month. Economists had forecast that employers would add 68,000 jobs, according to the median estimate in a Bloomberg News survey.
The European Central Bank should reverse this year’s rate increases to prevent the euro-area economy from slipping back into recession, members of the so-called shadow ECB council said.
A contraction in European manufacturing and plunging business and consumer confidence suggest the sharp slowdown in economic growth in the second quarter may continue in the third, they said. The ECB shadow council is a group of 15 economists and portfolio managers who watch economic developments and monetary policy in the euro area and issue recommendations each month.
U.S. Bank Lawsuits
In the U.S., more than a dozen large banks may be sued by the Federal Housing Finance Agency for misrepresenting the quality of mortgage securities sold at the height of the housing bubble, the New York Times reported. Bank of America Corp., JPMorgan Chase & Co., Goldman Sachs and Deutsche Bank AG (DBK) are among firms that will be targeted by the suits that the agency will file in coming days. The agency will seek billions of dollars in compensation, the newspaper said, citing three people briefed on the matter that it didn’t identify.
Deutsche Bank, Germany’s largest lender, tumbled 5.6 percent to 26.11 euros.
Investors should buy stocks as valuations suggest low economic growth is already accounted for in the price, wrote HSBC Holdings Plc equity strategist Garry Evans in a note.
Earnings at U.S. companies can buck the trend of weak economic growth as 33 percent of their sales last year came from outside the country and almost 50 percent of European company profits came from outside the region, Evans wrote in a report today.
European Markets Fall
National benchmark indexes declined in every western- European market except Portugal. The U.K.’s FTSE 100 Index (UKX) lost 2.3 percent, Germany’s DAX Index declined 3.4 percent and France’s CAC 40 Index retreated 3.3 percent.
AstraZeneca lost 3.6 percent to 2,810.5 pence after the London-based company said Crestor showed a benefit over Pfizer Inc.’s Lipitor in a study, though by one measure the result wasn’t statistically significant.
Gauges of carmakers and construction companies on the Stoxx 600 declined 4.5 percent and 3.2 percent, respectively. Peugeot SA (UG) lost 5.3 percent to 20 euros. Cie. de Saint-Gobain SA, Europe’s biggest supplier of building materials, retreated 4.2 percent to 33.60 euros.
Straumann dropped 5.9 percent to 144 Swiss francs after Goldman Sachs downgraded the shares to “sell” from “buy.”
Bilfinger Berger SE (GBF) declined 4.1 percent to 56.53 euros percent following a report that the company might spend 1 billion euros ($1.4 billion) on acquisitions over the next two years. The Financial Times Deutschland cited Chief Executive Officer Roland Koch as saying Bilfinger seeks opportunities for its building-services business in Italy and the U.K.
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