Most European Stocks Fall on Economy Concern; Unilever Declines

By Michael Patterson

July 31 (Bloomberg) -- Most European stocks fell, sending the Dow Jones Stoxx 600 Index to its third straight monthly drop, after reports showed the U.S. economy expanded at a slower pace than economists estimated last quarter and jobless claims surged.

The Stoxx 600 erased a 0.7 percent gain as the Commerce Department also said the world's largest economy contracted in the last three months of 2007. Sanofi-Aventis SA, France's biggest drugmaker, tumbled the most since May after a decline in sales dragged profit below projections. Unilever, the world's second-largest consumer-products company, had its steepest slump since June 2003 as earnings slipped 20 percent.

Europe's Stoxx 600 was little changed at 284.04 at 3:28 p.m. in London as retailers and technology companies also fell. Today's data signals the world's largest economy may have tipped into a recession last year as consumer spending slowed and the housing slump worsened.

``This is the latest in a string of bad news for economic growth,'' said Tony Dolphin, director of strategy and economics at Henderson Global Investors in London, which manages about $125 billion. ``This has got to be bad for earnings and for equity markets.''

Crude oil fell more than $1 a barrel on signs that high prices and slowing economic growth will curb fuel use in the U.S., the biggest energy-consuming country.

The Stoxx 600 has fallen 2 percent in July, bringing its retreat this year to 22 percent. Energy and raw-materials shares including Outokumpu Oyj and SBM Offshore NV led the drop in July as tumbling prices for oil and nickel sent the Reuters/Jefferies CRB Commodity Index to its steepest monthly slump in 28 years.

National Indexes

National benchmark indexes dropped in eight of the 18 western European markets. The U.K.'s FTSE 100 lost 0.3 percent. Germany's DAX gained 0.3 percent and France's CAC slipped 0.1 percent.

Outokumpu has tumbled 31 percent this month after the world's fourth-biggest stainless-steel maker reported profit below analysts' estimates. SBM Offshore, the largest producer of floating oil production platforms, is down 38 percent for the steepest decline in the Europe Stoxx Oil & Gas Index as crude prices retreated more than 14 percent from a July 11 record.

Sanofi-Aventis sank 4.3 percent to 45.27 euros today. The drugmaker reported second-quarter earnings that missed analysts' estimates as savings from job cuts failed to offset a decline in sales. Sanofi raised its earnings guidance for the year.

Unilever dropped 8.3 percent to 17.76 euros. Net income slipped to 909 million euros ($1.4 billion) from 1.14 billion euros a year earlier, the company said, below the 914.5 million- euro median estimate of 14 analysts surveyed by Bloomberg News.

Deutsche Bank Earnings

Deutsche Bank AG, Germany's largest bank, said second- quarter profit fell 64 percent as 2.3 billion euros in writedowns led to a second straight loss at its securities unit. Earnings beat the 491 million-euro median estimate of 19 analysts surveyed by Bloomberg after a year-earlier tax charge wasn't repeated. The shares slipped 0.1 percent to 58.77 euros.

The U.S. economy grew at a 1.9 percent annualized rate in the second quarter after expanding 0.9 percent in the previous quarter, the Commerce Department said. The report also showed the economy contracted at a 0.2 percent pace in the fourth quarter of last year, compared with a previously reported 0.6 percent gain.

Initial jobless claims increased by 44,000 to 448,000 in the week ended July 26, from a revised 404,000 the prior week, the Labor Department said. Economists in a Bloomberg survey had forecast a drop in claims. The total number of people on benefit rolls rose to the most since December 2003.

European stocks had advanced earlier as earnings from AstraZeneca Plc and HBOS Plc topped analysts' estimates.

AstraZeneca, HBOS

AstraZeneca climbed 2.8 percent to 2,457 pence after the drugmaker reported second-quarter profit of $1.62 billion, topping the $1.45 billion median estimate of seven analysts surveyed by Bloomberg.

HBOS added 5.4 percent to 286 pence, paring the decline this year to 63 percent. The lender said net income dropped to 931 million pounds ($1.84 billion) from 2.1 billion pounds a year earlier. That beat the 792 million-pound average estimate of seven analysts surveyed by Bloomberg.

The MSCI World Index of 23 developed markets has declined 2.1 percent this month, extending its loss for the year to 14 percent.

Peru's IGBVL Index is the world's worst-performing equity benchmark in local currency terms since June among 88 indexes tracked by Bloomberg. The gauge has tumbled 18 percent, extending its retreat this year to 24 percent.

Turkey's ISE National 100 Index is the best performer this month. The index has jumped 19 percent in July as concern eased that Prime Minister Recep Tayyip Erdogan's government may be ousted. The ISE-100 rose 1.2 percent today after Turkey's Constitutional Court rejected yesterday a call by prosecutors to shut down Erdogan's party, which has presided over record economic growth and foreign investment.

To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.