European Stocks Fall, U.S. Index Futures Drop; Vestas Slumps on Forecast

By Adam Haigh - Oct 31, 2011 7:24 PM GMT+0700

European stocks dropped, paring their biggest monthly gain since July 2009, as some investors remain reluctant to buy equities before the euro area’s leaders explain how they will fund their expanded bailout facility. U.S. index futures and Asian shares fell.

Vestas Wind Systems A/S tumbled 20 percent as the biggest maker of wind turbines cut its forecasts for revenue and margins based on earnings before interest and taxes this year after delays in expanding production at its new plant in Germany. HSBC Holdings Plc and BHP Billiton Ltd. led bank and commodity- company shares lower.

The Stoxx Europe 600 Index slid 1.1 to 246.19 at 12:21 p.m. in London, paring its monthly gain to 8.8 percent, the largest advance in more than two years. The gauge slipped 0.2 percent on Oct. 28, having rallied 3.6 percent the previous day, after the euro area’s leaders said they will boost the European Financial Stability Facility’s capacity in a bid to stem the debt crisis. The gauge jumped 4.2 percent last week, its fifth straight weekly gain.

“There are lots of missing details and it’s still frustrating slow,” said Kevin Gardiner, the global head of investment strategy at Barclays Plc’s wealth unit, which manages about $266 billion for clients. “But it’s shown a commitment that’s needed to provide the financial backstop for the banking system. Markets will stay volatile.” He spoke in a Bloomberg Television interview in London with Maryam Nemazee.

Futures contracts on the Standard & Poor’s 500 Index expiring in December retreated 1 percent and the MSCI Asia Pacific Index plunged 2.5 percent.

G-20 Meeting

The G-20 leaders convene on Nov. 3-4 in Cannes, France, a week after the euro area’s authorities pledged to magnify the capacity of their rescue fund to 1 trillion euros ($1.4 trillion). The euro area has already sought financial help from China and cooperation from the International Monetary Fund.

While the G-20 summit will be a “key milestone,” any commitments “are unlikely to be crystallized” until the European Financial Stability Facility’s overhaul is completed, said Jens Larsen, chief European economist at RBC Capital Markets in London.

European leaders aren’t offering China extra incentives in return for help resolving the euro area’s debt crisis, Henri Guaino, an adviser to French President Nicolas Sarkozy, said today. Sarkozy asked his Chinese counterpart Hu Jintao last week to build support for the enlarged rescue fund.

ECB Interest Rates

Only 6 of 54 economists surveyed by Bloomberg forecast that the new ECB President Mario Draghi will cut the benchmark interest rate on Nov. 3. The ECB increased rates for a second time this year to 1.5 percent in July.

The Stoxx 600 has fallen 11 percent this year amid concern that the euro area’s sovereign debt crisis will hamper growth. The gauge trades at 10.7 times the estimated earnings of its companies, compared with the average multiple of 12.1 over the past five years, according to data compiled by Bloomberg. More than half of the 145 companies in the Stoxx 600 that have released earnings since Oct. 11 beat analysts’ profit estimates, according to data compiled by Bloomberg.

Vestas slumped 20 percent to 89.20 kroner for its biggest slide in 14 months. The wind-turbine maker predicted revenue of 6.4 billion euros in 2011, down from the 7 billion euros it had forecast in August. Vestas said its 2011 Ebit margin will decline to 4 percent. The company projected a margin of 7 percent in August. Vestas said further delays at the facility remain possible.

HSBC, BNP Paribas

HSBC lost 2.4 percent to 551.7 pence. BNP Paribas SA declined 6.1 percent to 34.15 euros. Banks were among the worst performing of the 19 industry groups on the Stoxx 600.

UniCredit SpA slipped 3.3 percent to 86.9 euro cents as La Stampa reported that Italy’s largest bank plans to raise 6 billion euros to 8 billion euros. The newspaper didn’t say where it got the information. A UniCredit official declined to comment.

BHP Billiton declined 4.1 percent to 2,016.5 pence. Rio Tinto Group lost 4.2 percent to 3,467 pence. Copper, nickel and tin prices slumped on the London Metals Exchange.

Homeserve Plc tumbled 29 percent to 346.5 pence for the biggest slump on the Stoxx 600 after the U.K.-based emergency- repair service provider suspended all telephone sales and marketing because a review showed sales processes didn’t meet standards.

Clariant AG climbed 1 percent to 9.82 Swiss francs after reporting earnings before interest, taxes, depreciation, amortization and one-off items for the third quarter that beat some analyst estimates.

TNT Express NV rallied 6.6 percent to 6.27 euros, its biggest jump in three weeks, as Europe’s second-largest express- delivery service posted an unexpected third-quarter profit after increasing prices in Europe and Asia.

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

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