European stocks sank, heading for the lowest close since March, after Federal Reserve Chairman Ben S. Bernanke cut the central bank’s growth forecast for the world’s largest economy and failed to signal further stimulus.
Bayer AG (BAYN) slumped 6.3 percent as a study showed that rivals Pfizer Inc.’s and Bristol-Myers Squibb Co.’s experimental blood thinner apixaban prevented more strokes than a traditional treatment in patients with irregular heartbeats. Holcim Ltd. (HOLN) fell 2 percent as Exane BNP Paribas advised selling shares of the world’s second-biggest cement maker.
The Stoxx Europe 600 Index Index dropped 1.3 percent to 264.52 at 2:40 p.m. in London. The gauge has tumbled 9.2 percent from this year’s peak on Feb. 17 as U.S. economic data trailed forecasts and concern mounted that Greece will fail to repay all its debt. The gauge is heading for its lowest closing level since March 16.
Bernanke’s “providing a strong message; we are seeing a very slow second half of the year recovery,” Patrick Legland, the global head of research at Societe Generale SA in Paris said in a Bloomberg Television interview with Francine Lacqua. “Markets are extremely worried because we lack the political will at this stage” to solve the debt crisis in Europe.
The Fed yesterday reiterated a pledge to keep interest rates near zero and said it will complete a $600 billion bond- purchase program as scheduled this month, even as Bernanke said the recovery is progressing “more slowly” than expected. Fed officials lowered their predictions for U.S. growth and employment this year and next, forecasting that the economy will expand 2.7 percent to 2.9 percent in 2011, down from a projection of 3.1 percent to 3.3 percent growth in April.
U.S. Home Sales
A report today will probably show that new home sales in the U.S. dropped in May for the first time in three months as the country’s real-estate market struggles to recover. U.S. house sales decreased 4 percent to a 310,000 annual rate last month, according to the median forecast of 67 economists surveyed by Bloomberg News before the Commerce Department’s report, which is due at 10 a.m. in Washington. Estimates in the Bloomberg survey ranged from 288,000 to 345,000.
European stocks extended their losses after more Americans than forecast filed first-time claims for unemployment insurance last week. A report from the Labor Department showed that 429,000 people filed initial jobless claims in the week ended June 18. That exceeded the median estimate in a Bloomberg survey for 415,000.
Greece Debt Summit
European Union leaders hold a two-day summit in Brussels from today to discuss Greece’s financing needs as the nation attempts to avert a default. European Central Bank President Jean-Claude Trichet yesterday said danger signals for financial stability in the euro area are flashing red as the debt crisis threatens to infect banks. He spoke late yesterday in Frankfurt after a meeting of the European Systemic Risk Board.
Stocks in the U.S. and Europe may drop as much as 11 percent over the next 12 months as growth slows and earnings weaken, according to equity strategists at Exane BNP Paribas.
“Earnings and interest rates, two key drivers for equities, are as good as they are likely to get,” Bert Jansen, a stocks strategist at Exane in Paris, wrote in the report. “With bond yields, interest rates and inflation near record lows and profit margins close to record highs, it is difficult to see what will drive equity markets higher beyond 2011, amid slowing growth.”
Antonis Samaras, leader of the opposition in the Greek parliament, said his party will vote against the government’s new austerity measures, the Financial Times reported, citing an interview. The EU had called for all Greek political parties to support the package of budget cuts and tax increases.
European Services, Manufacturing
European services and manufacturing growth slowed in June more than economists had forecast, adding to signs that the economy is losing some momentum. A composite index based on a survey of euro-area purchasing managers in both industries fell to 53.6 from 55.8 in May, London-based Markit Economics said today. Economists had forecast a drop to 55.2, the median of 16 estimates in a Bloomberg survey showed. A reading above 50 indicates growth.
National benchmark indexes retreated in every western European market that was open today. Austria was closed for a holiday. The U.K.’s FTSE 100 Index slumped 1.5 percent, Germany’s DAX Index declined 1.7 percent and France’s CAC 40 Index declined 2.1 percent.
Bayer slumped 6.3 percent to 54.40 euros, its largest drop in more than two years. The results position apixaban ahead of Bayer’s Xarelto in a race to win approval to provide new stroke- preventing drugs to patients with the condition known as atrial fibrillation, wrote Mark Schoenebaum, an analyst with ISI Group Inc., in a note to investors.
Holcim, Banks Slip
Holcim sank 2 percent to 61.10 Swiss francs after its shares were downgraded to “underperform” from “neutral” at Exane. Separately, prosecutors charged its U.S. unit with discharging sulfur dioxide without a permit in Hagerstown, Maryland. The prosecutors have demanded a fine of $37,000 for each day that Holcim broke the emissions rules, bringing the total to more than $100 million, according to a report by Handelszeitung.
Banks were among the worst performing of the 19 industry groups in the Stoxx 600. Dexia SA (DEXB) lost 3.8 percent to 2.09 euros and Banco Bilbao Vizcaya Argentaria SA (BBVA) declined 4.8 percent to 7.62 euros.
Oil and gas shares slumped, with every company in the European gauge for the industry falling. Total SA (FP) sank 1.8 percent to 37.88 euros and BP Plc (BP/) dropped 1.6 percent to 438 pence. Oil for August delivery on the New York Mercantile Exchange declined as much as $5.33 to $90.32 a barrel. The International Energy Agency said it will release 60 million barrels of oil from emergency stockpiles, the third time the agency has coordinated the use of emergency reserves since its founding in 1974.
STMicroelectronics NV tumbled 5.3 percent to 6.47 euros as its chipmaking joint venture with Ericsson AB, ST-Ericsson, announced cost cuts aimed at saving $120 million annually and pushed back the date at which it expects to become profitable.
Temenos Group AG (TEMN) slid 5.1 percent to 24.15 francs after Cheuvreux SA cut its recommendation on the shares to “underperform” from “outperform.”