Date: Wed, 4 Apr 2012 21:55:25 +0700
Subject: (BN) European Stocks Fall as Fed Damps Stimulus Speculation
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April 4 (Bloomberg) -- European stocks fell for a second day after the Federal Reserve damped expectations of more monetary stimulus for the U.S. and Spain sold fewer bonds than its maximum target.
Volvo AB tumbled 4.6 percent after ACT Research said North American preliminary truck orders in March were less than expected. Carmakers declined, with Peugeot SA and Renault SA dropping at least 3 percent each, after a report showed U.S. sales of light vehicles rose less than forecast. Royal Bank of Scotland Group Plc lost 2.8 percent after people familiar with the matter said the lender canceled a bond sale.
The Stoxx Europe 600 Index retreated 1.3 percent to 260.86 at 2:58 p.m. in London, heading for the biggest decline in almost a month on a closing basis. The number of shares changing hands on the benchmark index was 26 percent more than the average over 30 days, data compiled by Bloomberg show.
Minutes from the Fed meeting “were not encouraging if you are a bull who’s hoping to hear that the door is still open for further possible stimulus,” said Simon Denham, managing director of Capital Spreads in London. “After each rally people start to get excited that we could push higher and break through to new highs, but then the markets come up against resistance and fail to follow through.”
The Fed is holding off on increasing monetary accommodation unless U.S. economic growth falters or prices rise at a rate slower than its 2 percent target, minutes released yesterday from a March 13 policy meeting showed.
“A couple of members indicated that the initiation of additional stimulus could become necessary if the economy lost momentum or if inflation seemed likely to remain below” 2 percent, according to the minutes.
Spanish Auction
Spain sold 2.6 billion euros ($3.4 billion) of bonds, near the minimum target, and borrowing costs rose in its first auction since the country said public debt will surge to a record this year. The Treasury had set a range of 2.5 billion euros to 3.5 billion euros for the sale.
The European Central Bank left its benchmark interest rate unchanged at a record low of 1 percent. The euro-area’s economic outlook remains subject to “downside risks,” President Mario Draghi said at a press conference in Frankfurt. “The remaining tensions in euro area sovereign-debt markets are expected to dampen economic momentum.”
National benchmark indexes fell in all of the 18 western European markets. France’s CAC 40 Index dropped 2.1 percent, the U.K.’s FTSE 100 Index slipped 1.5 percent and Germany’s DAX Index retreated 2.1 percent.
Euro-Area Data
Euro-area retail sales declined 0.1 percent from January, when they rose a revised 1.1 percent, the European Union’s statistics office in Luxembourg said today. Economists had forecast a drop of 0.2 percent in a Bloomberg News survey.
Euro-area services and manufacturing output contracted for a second month in March. A composite index based on a survey of purchasing managers in both industries dropped to 49.1 from 49.3 in February, London-based Markit Economics said today. That’s above an initial estimate of 48.7 on March 22. A reading below 50 indicates contraction.
In Germany, factory orders rose 0.3 percent in February, the Economy Ministry in Berlin said today. That’s less than the 1.5 percent-increase predicted by economists in a Bloomberg News survey.
Volvo lost 4.6 percent to 93.85 kronor after ACT Research said preliminary Class 8 truck orders in North America for March were 20,000 units, the second consecutive month that orders came in “below expectations.”
Industry Stocks
Shares fell in all 19 industry groups on the Stoxx 600, with an index of auto companies the worst performer.
U.S. sales of cars and light trucks rose to a 14.4 million seasonally adjusted annual rate, falling short of the 14.5 million median estimate of 16 analysts in a Bloomberg survey.
Peugeot SA plunged 5.4 percent to 10.82 euros, Renault SA slipped 3.8 percent to 37.53 euros, and Porsche SE retreated 1.8 percent to 43.71 euros.
RBS slid 2.8 percent to 26.14 pence as three people briefed on the matter said the lender pulled a $207 million sale of bonds backed by its own derivative trades in February. Investors scarred by losses on exotic debt balked at the complexity of the deal, the people said.
Veolia, Hikma
Veolia slipped 3.6 percent to 11.49 euros after Les Echos said without citing anyone that the company may decide today to take sole control of Coriscan ferry services operator Societe Nationale Maritime Corse Mediterranee.
Hikma Pharmaceuticals Plc lost 2.2 percent to 667.50 pence after GlaxoSmithKline Plc and Pfizer Inc. sued the company for planning to sell an injectable blood-clot treatment, saying it infringes a patent licensed by Glaxo for argatroban.
Logica Plc tumbled 6.3 percent to 92.55 pence after the Anglo-Dutch computer services provider said Seamus Keating, the head of its Netherlands unit, resigned.
BTG gained 2.4 percent to 346.30 pence after the company said sales for the year ended March 31 would reach as much as 195 million pounds ($309 million), more than previously forecast, because of higher-than-expected royalties from two drugs.
Ferrovial SA, Spain’s largest builder by market value, added 2.2 percent to 8.42 euros after Bank of America reiterated its buy recommendation on the shares and said Spain’s new tax rules won’t hurt the company.
To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
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