European Stocks Drop as Leaders Split

By Corinne Gretler - Oct 20, 2011 6:00 PM GMT+0700

European stocks declined for the third time in four days as splits emerged among the region’s leaders on a plan to end the debt crisis. Asian shares fell while U.S. index futures advanced.

Actelion Ltd. (ATLN) sank the most in more than 18 months as Europe’s largest biotechnology company said it expects drug sales to decrease next year. Schneider Electric SA (SU), the world’s biggest maker of low- and medium-voltage equipment, slid 7.4 percent after trimming its 2011 profit target. Ericsson AB, the world’s largest maker of wireless network equipment, led technology shares higher as profit increased.

The benchmark Stoxx Europe 600 Index slid 0.3 percent to 235.98 at 11:59 a.m. in London. The measure has still rallied 9.8 percent from this year’s low on Sept. 22 amid speculation policy makers will find a resolution to Europe’s fiscal woes. The MSCI Asia Pacific Index tumbled 1.7 percent today, while Standard & Poor’s 500 Index futures climbed 0.6 percent.

“The markets demand a solution now,” said Ben Hauzenberger, a Zurich-based fund manager at Swisscanto Asset Management AG, which oversees $53 billion. “The current flight- to-quality behavior of investors shows just how little confidence they have.”

Crisis-Fighting Effort

Euro-area leaders are due to meet on Oct. 23, with disagreement over the European Central Bank’s role threatening to hinder progress on the banking and economic questions needed to deliver the comprehensive strategy demanded by policy makers. While German Chancellor Angela Merkel this week sought to lower expectations that the crisis-fighting effort would climax at the summit in Brussels, Group of 20 finance chiefs last week set the meeting as a deadline for action.

“Sunday will be a day of suspense,” Hauzenberger said. “Whether success will replace failure is unclear.”

French President Nicolas Sarkozy flew to Frankfurt for an impromptu meeting last night with Merkel, the ECB’s President Jean-Claude Trichet and International Monetary Fund Director Christine Lagarde. Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of euro-area finance ministers, indicated the gathering failed to resolve differences. “We are still meeting,” he said as he departed.

“It appears that we might still be some miles away from a general agreement on that plan,” said Jean-Paul Jeckelmann, chief investment officer at Banque Bonhote & Cie. in Neuchatel, Switzerland, who helps manage $1.4 billion in equities. “It seems that going into the weekend, the odds are investors are placed for disappointment.”

EFSF Changes

Changes to the euro region’s revamped bailout fund may open the door to “massive” credit lines for countries like Italy and Spain, draft guidelines show. The European Financial Stability Facility may be able to offer loans worth up to 10 percent of a member states’ gross domestic product in precautionary aid “before they face difficulties raising funds” in bond markets, the draft shows.

The Federal Reserve’s Beige Book survey released late yesterday showed companies reported more doubt about the recovery even as the economy maintained its expansion last month. Many Fed districts described the pace of growth as “modest” or “slight” in September.

U.S. Labor Department figures today may show initial jobless claims decreased to 400,000 in the week ended Oct. 15 from 404,000 the previous week, according to the median estimate of 46 economists surveyed by Bloomberg News. A separate report will probably show sales of existing U.S. homes declined 2.5 percent to a 4.91 million annual rate, according to the median of 77 economists in a Bloomberg survey.

Actelion, Schneider

Actelion plunged 12 percent to 30 Swiss francs, the biggest slump since March 2010, after it said product sales will fall in the low- to mid-single digit range next year in local currencies. The company cited increased pricing pressure and competition in the U.S.

Schneider Electric tumbled 7.4 percent to 41.33 euros. The company trimmed its 2011 profit target for the second time in four months on rising labor costs in emerging economies and said it may cut job. Earnings before interest, taxes and amortization will probably account for about 14 percent of revenue this year, down from a July forecast of about 15 percent, it said.

Rio Tinto Group, the world’s second-largest mining company, slipped 2.1 percent to 3,073 pence as copper dropped for a fourth day in London trading. Kenmare Resources Plc (KMR) fell 2.7 percent to 43.4 euro cents while Kazakhmys Plc (KAZ) lost 1.8 percent to 859 pence.

Nexans Downgrade

Nexans SA (NEX), the second-biggest maker of cables, sank 3.3 percent to 44.97 euros after Goldman Sachs Group Inc. cut the stock to “sell” from “neutral.”

Ericsson pushed a gauge of technology shares higher, rising 7.3 percent to 70.25 kronor. The company said third-quarter net income climbed to 3.82 billion kronor ($573 million) from 3.68 billion kronor a year earlier. That topped the 3.66 billion- krona estimate of 21 analysts in a Bloomberg survey.

Logitech International SA (LOGN), the world’s biggest maker of computer mice, rallied 6.7 percent to 7.59 Swiss francs and Alcatel-Lucent rose 3 percent to 2.02 euros.

Nokia Oyj (NOK1V) soared 9.6 percent to 4.91 euros, the biggest gain in two months. The Finnish maker of mobile phones reported a smaller-than-estimated loss and forecast a profitable quarter for the handset business.

Akzo Advances

Akzo Nobel NV (AKZA) gained 3.1 percent to 35.98 euros. The world’s largest paintmaker said it plans an overhaul of household coatings businesses in the U.S. and Europe and other units to help cut costs and boost earnings by 500 million euros by 2014. The maker of Dulux and Glidden paints also said it will reorganize wood finishes and adhesive operations to strengthen its competitiveness.

Petropavlovsk Plc (POG), a Russian gold mining company, rallied 6.7 percent to 720 pence, the highest price in almost a month, after it said third-quarter output rose 65 percent after production increased at its Pioneer site. So-called attributable gold output climbed 228,100 ounces from 138,300 ounces a year earlier, the London-based company said. Petropavlovsk also reaffirmed its 600,000-ounce full-year forecast.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net