Thursday, July 28, 2011

European Stocks Slide; Credit Suisse Drops

European stocks declined for a fourth day as U.S. lawmakers moved no closer to a deal to avert a default and as companies from Credit Suisse Group AG (CSGN) to BASF SE (BAS) reported profit that missed analysts’ estimates. Asian stocks fell and U.S. index futures gained.

Credit Suisse, Switzerland’s second-biggest bank, and BASF, the world’s largest chemical maker, both retreated more than 1 percent. Volkswagen AG (VOW) sank 3.3 percent as it posted first-half earnings that missed analysts’ estimates. Technip SA (TEC), Europe’s second-largest oilfield-services provider, climbed 2.9 percent after increasing its 2011 operating margin estimate.

The Stoxx 600 slid 0.7 percent to 265.29 at 10:19 a.m. in London. The index has fallen 8.9 percent from this year’s high on Feb. 17 as investors speculated that Europe’s sovereign-debt crisis will derail the economic recovery and as concern mounted that U.S. lawmakers will fail to agree on the federal government’s debt ceiling by next week’s deadline.

“What’s really weighing on the market is the problem of the U.S. debt ceiling,” said Jerome Forneris, who helps manage $11 billion at Banque Martin Maurel in Marseille. “We only have 4 1/2 days left. If the U.S. defaults, it’s bad for the whole world. They have to resolve this problem. Investors are pulling money out of stocks and buying gold. People are worried about the uncertainty and are looking for safe havens.”

Futures on the Standard & Poor’s 500 Index expiring in September advanced 0.3 percent today, while the MSCI Asia Pacific Index decreased 0.9 percent.

Sovereign Credit Rating
The House of Representatives planned to vote today on a Republican proposal to increase the debt limit. House Speaker John Boehner of Ohio gained support among fellow Republicans after reworking the legislation to cut $917 billion over 10 years, more than he originally planned. All 51 Senate Democrats and two independents signed a letter yesterday pledging to oppose the measure.

Moody’s Investors Service, Standard & Poor’s and Fitch Ratings have said they may cut the U.S.’s top-level sovereign rating if officials fail to resolve the stalemate on the $14.3 trillion borrowing ceiling before the Treasury Department’s deadline on Aug. 2.

The S&P 500 sank 2 percent yesterday, its biggest drop in almost two months, and the cost of insuring against a U.S. default climbed to the highest level since February 2010.

A report at 10 a.m. in Washington will show that the number of contracts to buy previously owned U.S. homes fell in June for the second time in three months, a sign the housing market is struggling to regain its footing two years into the expansion, economists predicted.

Earnings Miss Estimates
Of the 135 Stoxx 600 companies that have reported quarterly earnings since July 11, 50 percent have missed analysts’ estimates for profit per share and 41 percent have beaten predictions.

The VStoxx Index, a measure of the cost of insuring against losses in the Euro Stoxx 50 Index, advanced 4.2 percent, extending yesterday’s 8.3 percent gain.

Credit Suisse dropped 1.3 percent to 28.88 Swiss francs. The lender said it plans to cut about 2,000 jobs after second- quarter profit fell 52 percent to 768 million francs ($959 million) on lower earnings from trading. That missed the 1.06 billion-franc average estimate of analysts surveyed by Bloomberg.

Chemical makers fell the most among the 19 industry groups in the Stoxx 600, losing 2.2 percent, as BASF and Kemira Oyj (KRA1V) retreated.

BASF plunged 5.2 percent to 62.45 euros for its biggest drop in more than four months. The chemical company reported second-quarter profit that fell short of analysts’ estimates, held back by a weaker U.S. dollar and shrinking margins. Earnings before interest, taxes and one-off items were little changed at 2.24 billion euros ($3.2 billion).

Kemira, SBM Offshore
Kemira sank 9.4 percent to 10.82 euros. The Finnish maker of water-treatment chemicals reported second-quarter net income of 30.7 million euros, missing the 34.3 million-euro mean estimate of six analysts surveyed by Bloomberg.

Volkswagen AG slipped 3.3 percent to 139.35 euros as Europe’s largest carmaker posted first half Ebit of 6.09 billion euros. That fell short of the 6.17 billion-euro average estimate of 14 analysts surveyed by Bloomberg.

Technip gained 2.9 percent to 75.94 euros. The company said second-quarter net income rose to 132.5 million euros from 106.1 million euros a year earlier. That beat the average analyst estimate of 108.6 million euros. The company lifted its full- year estimates.

Lafarge, Siemens Slip
Construction and industrial stocks decreased, led by Lafarge SA (LG), which dropped 2.9 percent to 38.53 euros. The world’s biggest cement maker said second-quarter operating profit declined to 702 million euros from 838 million euros a year earlier. Analysts surveyed by Bloomberg had estimated operating profit of 741 million euros.

Siemens decreased 1.5 percent to 89.78 euros. Europe’s largest engineering company said profit in its fiscal third quarter fell 47 percent to 763 million euros because of a fine tied to a nuclear-energy joint venture and charges at its health-care unit. The company reiterated that profit will exceed 7.5 billion euros for the year ending Sept. 30.

Air France-KLM (AF) Group slumped 7.4 percent to 8.69 euros. Deutsche Lufthansa AG (LHA) declined 3.1 percent to 14.03 euros. Europe’s biggest airlines posted earnings that missed analysts’ estimates as fuel costs soared and uprisings in north Africa clipped demand.

SBM Offshore NV (SBMO) tumbled 17 percent to 15.88 euros, its biggest slide in more than two years. The company said it will report a first-half net loss after booking a $450 million impairment charge.

Vallourec SA (VK) plunged 16 percent to 70.38 euros for its biggest retreat since 2008. The French producer of steel pipes for the oil and gas industry said that second-quarter profit declined from a year earlier as rising raw material costs cut the company’s margins.

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