European Stocks Post Weekly Drop After China, U.S. Global Growth Reports

European stocks fell this week as economic reports in China and the U.S. signaled the global recovery may falter and as Bank of America Corp. and Citigroup Inc. reported sales that trailed analysts’ estimates.
Credit Suisse Group AG, Deutsche Bank AG and Barclays Plc declined more than 3 percent as concerns grew about the performance of some U.S. banks in the second quarter. Rio Tinto Group and BHP Billiton Ltd. led raw-material shares to the largest drop among all 19 industry groups on the benchmark Stoxx Europe 600 Index.
The Stoxx 600 fell 0.8 percent to 248.11, paring last week’s 5.4 percent rally, the biggest gain in a year. The gauge remains 8.8 percent below this year’s high on April 15 on concern that the global economic recovery is losing steam as indebted European governments slash spending and China takes steps to tame inflation.
“Recent worries about the strength of the economic recovery have come back to the forefront of investors’ minds,” said David Jones, chief market strategist at IG Markets in London. “The past quarter may well have been good for business but at the moment the future still looks fragile and it is difficult to see much real headway being made by stock markets in the short to medium term.”
Growth Eased
China’s economic growth eased to 10.3 percent in the second quarter after the government succeeded in tempering credit expansion, investment spending and property speculation. The gain in gross domestic product was less than an 11.9 percent increase in January-March from a year earlier.
In the U.S., consumer confidence slumped in July to the lowest level in a year, a sign that the biggest part of the world’s largest economy is losing momentum. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment fell to 66.5 from 76 a month earlier. The gauge was projected to fall to 74, according to the median forecast in a Bloomberg News survey of 62 economists.
“There has been a definite change in perception of the U.S. being somehow insulated from what is happening in the rest of the world,” said Gary Baker, head of European equity strategy at BofA Merrill Lynch at press briefing in London this week. “Investors are starting to question those assumptions.”
Cash Balances
Asset allocators have scaled back their forecasts for global growth, according to a Bank of America Merrill Lynch Global Research survey of respondents who together manage about $530 billion. A net 12 percent of those surveyed predicted a weaker economy in the next 12 months compared with 42 percent who said they expected a stronger economy two months ago. Respondents raised their cash balances from the previous month.
National benchmark indexes fell in 14 of the 18 western European markets. France’s CAC 40 Index lost 1.5 percent and Germany’s DAX Index retreated 0.4 percent. The U.K.’s FTSE 100 gained 0.5 percent.
U.S. companies began reporting quarterly results this week. Citigroup and Bank of America joined General Electric Co. reporting revenue that missed analysts’ estimates, triggering declines among European lenders. Companies on the Standard & Poor’s 500 Index are projected to increase profits by 34 percent in 2010 and 18 percent in 2011, the fastest two-year gain since 1995, according to analysts’ estimates compiled by Bloomberg.
Banks Retreat
Credit Suisse lost 3.4 percent. Deutsche Bank, Germany’s largest lender, slid 3.2 percent. Barclays, the U.K.’s third- biggest, slipped 5.3 percent.
Rio Tinto, the world’s third-largest mining company, declined 5.3 percent and BHP Billiton, the biggest, slid 2.2 percent. Copper traded on the London Metal Exchange for delivery in three months dropped 4 percent this week.
Acergy SA, which designs and delivers oil services in harsh and remote offshore environments, fell 7.6 percent. BP Plc’s Macondo well leak in the Gulf of Mexico may delay deepwater projects beyond 2011, according to Acergy Chief Executive Officer Jean Cahuzac.
Roche Holding AG declined 3.9 percent. Avastin paired with chemotherapy treatments didn’t help patients survive longer than use of the other drugs alone, according to a U.S. Food and Drug Administration staff review. FDA advisers will meet July 20 to evaluate the drug and consider whether use in breast cancer should be continued, expanded or halted.
Halted Flow
BP surged 12 percent, a third straight weekly rally, as the company temporarily halted the flow of oil from its Macondo well and as people familiar with the matter said the company is negotiating the sale of assets in Alaska for up to $11 billion. BP said yesterday that it is “encouraged” after a pressure test that halted the spill indicated no sign of an oil leak after the first 17 hours.
Bayerische Motoren Werke AG, the world’s biggest maker of luxury cars, surged 7.7 percent after saying higher volumes in 2010 will boost profit. The carmaker forecast 2010 sales volumes will rise by about 10 percent to more than 1.4 million units, with a full-year profit margin of more than 5 percent expected for the automobiles segment.
Ferrovial SA jumped 9.3 percent after Canada Pension Plan Investment Board made a A$3.47 billion ($3.05 billion) offer for toll-road operater Intoll Group.
Piraeus Bank SA surged 16 percent as Greece’s fourth- largest lender offered to buy government stakes in two banks for 701 million euros. Piraeus Chief Executive Officer Michalis Sallas said the bank would purchase 77 percent of Agricultural Bank of Greece SA and 33 percent of Hellenic Postbank SA to create Greece’s biggest bank. Greece’s Finance Ministry said it is studying the offer.