European Stocks Drop on Economic Concerns; BMW, Siemens Retreat

By Adam Haigh

Sept. 4 (Bloomberg) -- European stocks declined for a second day after European Central Bank President Jean-Claude Trichet said policy makers remain focused on inflation even as the economy slows.

Bayerische Motoren Werke AG lost 1.6 percent and Renault SA sank 2.5 percent, leading declines among carmakers. Siemens AG, Europe's biggest engineering company, slipped 2.2 percent as German factory orders unexpectedly fell. The drop in the Dow Jones Stoxx 600 Index was limited by Unilever's 5.6 percent rally after it appointed a new chief executive officer and BP Plc's 2 percent gain as it reached an accord on a management dispute with its billionaire partners in Russian oil venture TNK-BP.

The Stoxx 600 lost 1 percent to 282.71 at 2:31 p.m. in London after the European Central Bank and the Bank of England kept borrowing costs on hold.

``The general sentiment is that we are heading lower for equity markets,'' said Joshua Raymond, market strategist at City Index Ltd. in London. ``Concerns over growth remain in focus.''

The Stoxx 600 is down 22 percent this year as the global economy cooled and financial firms posted writedowns and credit- related losses of more than $500 billion.

The ECB maintained its benchmark interest rate at a seven- year high of 4.25 percent, while the BOE kept borrowing costs at 5 percent, as inflation concerns made it harder for policy makers to respond to the risk of recession. Trichet said today ``upside risks to price stability prevail.''

Economy Watch

German factory orders unexpectedly fell 1.7 percent in July, extending their longest ever declining streak and increasing the likelihood that Europe's largest economy is heading for a recession. Reports yesterday showed consumer spending, company investment and exports fell in the second quarter, dragging the European economy into a 0.2 percent contraction.

The Institute for Supply Management's non-manufacturing index, which captures almost 90 percent of the U.S. economy, probably remained unchanged at 49.5 in August, according to the median of forecasts in a Bloomberg News survey of economists.


A private report based on payroll data said companies in the U.S. cut an estimated 33,000 jobs in August, while government figures showed initial jobless claims climbed more than forecast last week.

BMW, the world's largest maker of luxury cars, sank 1.6 percent to 28.615 euros. Renault, France's second-biggest carmaker, retreated 2.5 percent to 57.80 euros.

Industrial Goods

Siemens fell 3.2 percent to 71.95 euros. ThyssenKrupp AG, Germany's biggest steelmaker, slipped 2.9 percent to 30.85 euros. Industrial-goods companies were among the worst performers in the Stoxx 600 today.

Saab AB, the Swedish builder of the Gripen fighter plane, cut its full-year earnings outlook, citing order delays and a slowdown in Swedish defense spending. The shares slumped 16 percent to 134.25 kronor.

TUI AG, owner of the region's largest tourism company, fell 4.1 percent to 13.37 euros. The stock will be replaced by K+S AG in Germany's benchmark DAX Index as of Sept. 22, Deutsche Boerse AG said yesterday after the close of trading.

Unilever rallied 5.6 percent to 1,574 pence. The world's second-largest consumer-products maker said it plans to appoint Nestle SA's Paul Polman as CEO to succeed Patrick Cescau.

BP advanced 2 percent to 516.25 pence. Europe's second- biggest oil producer and its billionaire partners in TNK-BP may complete a legally binding agreement to resolve their conflict in the ``next couple months,'' shareholder representative Stan Polovets said.

BP agreed to demands made by Russian partners to remove TNK- BP CEO Robert Dudley, expand the board and consider selling as much as 20 percent of a unit, AAR CEO Polovets told Bloomberg Television today.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net