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European Stocks Drop Amid Concern on U.S. Economy
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European stocks fell, with the Stoxx Europe 600 Index posting its
biggest weekly drop in a month, amid concern that automatic spending
cuts and tax increases may push the world’s largest economy into a
recession.
10
November, 2012
Credit
Agricole sank 5.9 percent after posting a wider third-quarter loss
than analysts had estimated. Novo Nordisk A/S rallied 7.3 percent as
an advisory panel to the Food and Drug Administration backed its
insulin treatment.
The
Stoxx 600 slipped 0.1 percent to 270.27 at the close in London, after
earlier declining as much as 1.1 percent. Four stocks fell for every
three that rose. The equity benchmark retreated 1.7 percent this
week. The gauge has still rallied 16 percent from this year’s low
on June 4 as European Central Bank President Mario Draghi said he
would do everything to protect the single currency and the Federal
Reserve opted for a third round of asset purchases.
“Now
that the election is over, people are realizing that actually the
election as such didn’t give us any more clarification on the
single biggest risk factor towards year end which is the fiscal
cliff,” Witold Bahrke, a senior strategist at PFA Pension A/S in
Copenhagen, where he helps oversee $55 billion. “That is pulling
markets down a bit here and then we have the issue of Greece which is
dragging on.”
The
U.S. economy will contract if Congress fails to act, allowing more
than $600 billion of tax increases and spending cuts to take effect
next year, Fitch Ratings said.
“We
think that will tip the U.S. back into recession,” Fitch Managing
Director Ed Parker said in an interview in Istanbul yesterday. “This
should be a wholly avoidable, unnecessary recession.”
U.S.
Economy
A
report from the Congressional Budget Office published late yesterday
reiterated that failing to avoid the fiscal cliff would lead to a
recession in the first half of 2013.
The
Thomson Reuters/University of Michigan consumer- sentiment index
climbed to 84.9 in November. That beat the average economist estimate
for a figure of 82.9.
In
Europe, the Bank of France said that the country’s economy may
shrink in the fourth quarter as a survey of business confidence held
near a two-year low last month.
Eighteen
companies on the Stoxx 600 report earnings today. Of the 243
companies listed on the equity benchmark that have reported quarterly
earnings this season, 130 have exceeded analysts’ projections,
while 110 have missed them, according to data compiled by Bloomberg.
National
benchmark indexes declined in nine of the 18 western-European
markets. France’s CAC 40 rose 0.5 percent and the U.K.’s FTSE 100
slid 0.1 percent. Germany’s DAX decreased 0.6 percent.
Chinese
Industry
China’s
National Bureau of Statistics said industrial production rose 9.6
percent in October from a year earlier, a faster pace than the 9.4
percent median estimate in a Bloomberg survey of economists. Retail
sales climbed 14.5 percent last month from a year earlier. Economists
had projected a 14.4 percent gain.
Credit
Agricole slumped 5.9 percent to 5.57 euros. France’s third-largest
bank posted a quarterly loss of 2.85 billion euros ($3.6 billion),
wider than the 1.88 billion-euro average estimate of seven analysts
surveyed by Bloomberg. The lender’s decision to sell its Emporiki
Bank unit to Greece’s Alpha Bank SA cut net income by 1.96 billion
euros.
Deutsche
Bank AG and Commerzbank AG, Germany’s two biggest lenders, fell 2.3
percent to 33.52 euros and 6.3 percent to 1.33 euros, respectively. A
gauge of lenders contributed the most to the Stoxx 600’s decline.
Rheinmetall
Falls
Rheinmetall
AG plunged 5.7 percent to 32.85 euros. The company, which helps make
Germany’s Leopard 2 battle tank, reported third-quarter profit of
33 million euros, falling short of the average analyst estimate of 35
million euros. The company cut its full-year sales forecast to 4.8
billion euros from 4.9 billion euros.
Aegon
NV, the Dutch insurer which owns Transamerica Corp., fell 3.5 percent
to 4.25 euros. The stock was downgraded to neutral from buy at Bank
of America Corp.’s Merrill Lynch unit.
Corio
NV retreated 3.3 percent to 32.29 euros as the Netherlands’ largest
publicly traded property company reported profit that missed some
analysts’ estimates.
Earnings
excluding changes in asset values and deferred tax declined to 196.6
million euros in the first nine months compared with 197.1 million
euros a year earlier, Utrecht-based Corio said. Kai Klose, an analyst
at Berenberg Bank in London, had predicted 204.7 million euros of
profit on the same measure.
Telecom
Italia
Telecom
Italia SpA rose 3.7 percent to 69.1 euro cents after posting
third-quarter profit that beat analysts’ estimates. Net income
declined 13 percent to 681 million euros from a restated profit of
786 million euros a year earlier, the company said. Analysts had
predicted profit of 664 million euros, according to data compiled by
Bloomberg.
Novo
Nordisk surged 7.3 percent to 928 kroner, its biggest rally in two
years. A majority of advisers on the FDA panel said that the risks
posed by the drug will probably prove insufficient to block its
approval. The FDA has not told the world’s largest insulin maker
when it will complete the review of the medicine, which is called
Tresiba.
Denmark’s
OMX Copenhagen 20 Index jumped 3.4 percent today, its biggest advance
in a year. Novo accounts for 45 percent of the equity benchmark by
weight.
French
Recession Looms as Industrial Production Slumps
French
industrial production slumped and confidence among factory executives
held near the lowest in almost three years, prompting the Bank of
France to indicate that Europe’s second-largest economy may be
tipping into recession.
9
November, 2012
Production
fell 2.7 percent in September from August, Paris-based statistics
office Insee said today. That’s the biggest drop since January 2009
and more than the 1 percent decline forecast by economists in a
Bloomberg News survey. With sentiment among manufacturing executives
unchanged at 92 in October, the Bank of France said the economy may
shrink in the fourth quarter. Previous surveys suggest it also
contracted in the third.
That
puts France on the verge of recession three years after it emerged
from the last one as President Francois Hollande struggles to reduce
the budget deficit and improve the nation’s competitiveness. With
companies such as PSA Peugeot Citroen SA cutting thousands of jobs,
unemployment has jumped to a 13-year high and the European Commission
said this week that it’s likely to rise further.
“The
latest French industrial data makes for particularly grim reading,”
said Nicholas Spiro, managing director of Spiro Sovereign Strategy in
London. “The problem in France is the perennial lack of growth.”
While
the French economy last shrank at the start of 2009, it hasn’t
expanded since the third quarter of last year, with gross domestic
product stagnating for the past three quarters. Insee will publish
third-quarter GDP on Nov. 15.
Stocks,
Euro Retreat
European
stocks retreated, with the Stoxx Europe 600 Index (SXXP) heading for
its biggest weekly decline since September. The index was down 0.5
percent at 269.26 at noon in Frankfurt. The euro was down 0.3 percent
at $1.2713, a two-month low.
Europe’s
sovereign debt crisis, which has already pushed five of the 17 euro
nations into recession, is now starting to curb growth in Germany,
the region’s largest economy.
The
Brussels-based commission this week forecast the euro- area economy
will expand just 0.1 percent in 2013 after contracting 0.4 percent
this year.
In
Italy, industrial output declined the most in five months in
September, signaling the country remained mired in recession in the
third quarter. Output fell 1.5 percent from August, when it rose 1.7
percent, national statistics office Istat said in Rome today.
U.K.
Trade Deficit
Britain’s
trade deficit narrowed more than economists forecast in September as
exports rose, led by capital goods and chemicals. The goods-trade gap
fell to 8.37 billion pounds ($13.4 billion) from 9.98 billion pounds
in August, the Office for National Statistics said today in London.
Exports rose 1.1 percent, while imports fell 3.9 percent.
Hollande
plans to raise France’s main sales tax rates to finance a cut in
payroll charges, throwing support behind businesses for the first
time in a bid to counter a record trade deficit and revive growth.
The plan involves 20 billion euros ($26 billion) in tax increases and
10 billion euros in spending cuts.
By
lifting the two highest value-added tax rates in 2014, Hollande is
revisiting a policy he campaigned against in his successful bid to
unseat predecessor Nicolas Sarkozy earlier this year.
The
move comes as International Monetary Fund and the commission increase
pressure on France to improve its competitiveness as the debt crisis
prompts neighboring Spain and Italy to overhaul their economies.
French
Malaise
The
commission predicts the French economy will barely expand next year
as exporters continue to lose ground to competitors in other
countries. GDP will rise 0.4 percent in 2013, half the pace expected
by Hollande’s government, after 0.2 percent growth this year, the
commission said on Nov. 7.
Hollande
needs to embark on a significant overhaul of French labor laws to
prevent the country from falling behind its European peers, the IMF
said on Nov. 5.
“The
lack of competitiveness in the French economy is now the major
challenge to its macro-economic stability,” the Washington-based
fund said. The economic discussion that Hollande has already started
“represents a unique opportunity to undertake vigorous reform.”
Tax
Increases
Hollande’s
deficit-reduction plan relies too much on tax increases, which hurt
economic growth more than spending reductions, Bank of France
Governor Christian Noyer said in an interview with Le Progres
newspaper published today.
“I
would prefer more savings from spending and less emphasis on
revenue,” Noyer said. “Still, raising taxes reduces deficits more
quickly. In future, the focus should be on spending.”
The
plans are just the beginning as France seeks to restore
competitiveness, French Finance Minister Pierre Moscovici said.
“We’re
walking a tightrope,” Moscovici told business leaders in Dijon
yesterday. The competitiveness plan is a “starting point, not the
end of the story.”
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