By Daniela Silberstein
Sept. 24 (Bloomberg) -- European stocks fell for the first time in three days as German business confidence rose less than forecast, adding to speculation a six-month rally has outpaced prospects for the economy.
Hennes & Mauritz AG led retailers lower as a sales decline worsened. Air France-KLM Group dropped 2.8 percent after UBS AG recommended selling shares of Europe’s largest airline. 3i Group Plc sank 3.3 percent as the pace of new investments dropped. Aiful Corp., Japan’s second-biggest consumer lender by assets, tumbled 24 percent after forecasting a full-year loss.
Europe’s Dow Jones Stoxx 600 Index slipped 0.7 percent to 243.16 at 10:54 a.m. in London as 17 out of 19 industry groups retreated. The gauge has soared 54 percent since March 9 as the Group of 20 nations committed about $12 trillion to revive growth and the Federal Reserve kept overnight borrowing costs near zero to unlock credit markets.
“The market is ripe for a few weaker days in a row,” said Rudolf Buxtorf, who manages about $114 million at RBS Coutts Bank in Zurich. “The advances are saturated and any negative news can trigger momentum to the downside. Stocks are no longer cheap.”
The rally has pushed valuations on the Stoxx 600 to more than 50 times the profit of its companies, the most expensive level since 2003, according to data compiled by Bloomberg.
German business confidence rose to a 12-month high of 91.3 from 90.5 in August, according to the Ifo institute in Munich. Economists had forecast a reading of 92, the median of 40 projections in a Bloomberg News survey showed.
U.S. Futures
Standard & Poor’s 500 Index futures advanced 0.1 percent. The benchmark index for U.S. equities slid yesterday as the Fed signaled it will use fewer tools to bolster economic growth.
The central bank, following a two-day policy meeting, changed the wording in the final paragraph of its statement to say it will continue to employ a “wide range of tools” to bolster the economy. In its August statement, it said it would use “all available” tools.
The Fed left its target rate for overnight loans between banks in a record-low range between zero and 0.25 percent, and said it will stay “exceptionally low” for an “extended period.” The central bank said the economy has “picked up,” activity in the housing industry has increased, household spending seems to have stabilized and businesses are cutting back on investments and staffing at a slower pace.
The MSCI Asia Pacific Index rose 0.3 percent today as trading in Japan resumed after a three-day holiday.
G-20 Meeting
Leaders from the G-20 nations are meeting in Pittsburgh today and tomorrow to work on an accord to prevent a repeat of the worst financial crisis since the Great Depression and ensure a sustained recovery. U.S. President Barack Obama and his counterparts may be saddled with the weakest recovery since World War II if they are to pay off the $9 trillion tab they ran up rescuing the world economy.
H&M slid 2.6 percent to 398 kronor, pulling a gauge of retail stock to the biggest decline among 19 industry groups on the Stoxx 600. Europe’s second-largest clothing retailer said revenue at stores open at least a year fell 11 percent last month, the fourth consecutive drop and worse than July’s 3 percent decrease. Third-quarter net income of 3.46 billion kronor ($504 million) missed the 3.5 billion-krona average estimate of 11 analysts compiled by Bloomberg.
Airlines Fall
Air France slid 2.8 percent to 12.47 euros after UBS gave the airline a “sell” recommendation in new coverage.
British Airways Plc dropped 3.7 percent to 221.4 pence. Europe’s third-largest carrier was downgraded to “hold” from “buy” at Citigroup Inc., which said mid-cycle share-price valuations were reached “far earlier than expected.”
3i sank 3.3 percent to 278.5 pence. Europe’s biggest publicly traded private-equity firm said the pace of new investments dropped 75 percent as a lack of debt financing brought the buyout market nearly to a near-halt.
Aiful plummeted 24 percent to 102 yen in Tokyo on its loss forecast and plans to cut as much as 44 percent of its workforce.
London Stock Exchange Group Plc slid 3.1 percent to 852 pence. Europe’s oldest independent bourse said trading dropped 43 percent in the five months ended Aug. 31 as stocks slumped amid the worst financial crisis since the Great Depression and the company lost market share.
Carlsberg, Solvay
Carlsberg A/S, the Danish brewer that’s also the biggest beer producer in Russia, fell 2.5 percent to 383.25 kroner after the Russian government raised beer taxes. Duty will rise 50 percent a year in 2010 through 2012, Finance Minister Alexei Kudrin said, reaching 10 rubles (33 cents) a liter in three years from 3 rubles now, according to remarks posted on the ministry’s Web site.
Solvay SA rallied 3.8 percent to 76.95 euros, paring four days of declines. Abbott Laboratories made a bid to purchase the pharmaceutical unit of the Belgian company, the Wall Street Journal reported, citing people familiar with the matter.
A report today may show sales of existing U.S. homes climbed in August to the highest level in two years, another sign the real-estate collapse that triggered the global recession is abating, economists said. Separate data from the Labor Department is projected to show the number of Americans seeking jobless benefits rose last week.
A repeat of the grand coalition between German Chancellor Angela Merkel’s Christian Democrats and the Social Democrats may be the best election outcome for the country’s stock market, if history is any guide. Since, 1987, the only time Germany’s 30- company DAX Index advanced in the two months surrounding a vote was 2005, the only election resulting in a coalition between the CDU and the SPD.
To contact the reporter on this story: Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net.
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