Stocks in Europe Falter as Leaders Meet

By Julie Cruz - Jan 9, 2012 6:42 PM GMT+0700
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Financial traders monitor data on computer screens below a display of the DAX index curve at the Frankfurt Stock Exchange during the final seconds of the last day of trading for 2011 in Frankfurt, Germany on Dec. 30, 2011. Photographer: Simon Dawson/Bloomberg

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Jan. 9 (Bloomberg) -- Willem-Mark Nabarro, head of European equities at Exane BNP Paribas, talks about the region's debt crisis and his investment strategy. Nabarro also discusses the meeting later today between German Chancellor Angela Merkel and French President Nicolas Sarkozy. He speaks with Caroline Hyde on Bloomberg Television's "First Look." (Source: Bloomberg)

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Jan. 9 (Bloomberg) -- Jonathan Golub, chief U.S. market strategist at UBS Securities LLC, talks about the outlook for U.S. stocks, global markets and his investment strategy. He speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

European stocks retreated, paring three weeks of gains for the benchmark Stoxx Europe 600 Index, as German Chancellor Angela Merkel and French President Nicolas Sarkozy meet today to agree new rules for the euro. U.S. index futures fluctuated, while Asian shares rose.

UniCredit SpA (UCG) tumbled as rights to buy the bank’s shares slumped in their first day of trading in Milan. Nokia Oyj (NOK1V) fell 3.3 percent as supplier RF Micro Devices Inc. reported preliminary quarterly revenue that trailed its earlier forecast. Renault (RNO) SA advanced 1 percent after Citigroup Inc. recommended buying the carmaker’s shares.

The Stoxx 600 (SXXP) slid 0.3 percent to 246.87 at 11:38 a.m. in London, after earlier rising as much as 0.4 percent. The gauge gained 1.2 percent last week as economic reports from around the world added to optimism that the global economy can weather the fallout from the euro area’s sovereign-debt crisis. Standard & Poor’s 500 Index futures slipped 0.1 percent, while the MSCI Asia Pacific Index gained 0.3 percent.

“We believe that a combination of weaker earnings numbers, a further deterioration in euro-zone growth in the first quarter, and further political tensions are likely to push equities down before they recover more sustainably, most likely later in the first half,” a team of strategists at Goldman Sachs Group Inc., led by Peter Oppenheimer in London, wrote in a report dated Jan. 8. “There remain several issues in Europe that are likely to put upward pressure on sovereign yields over the next couple of months that are also likely to weigh on equities.”

Merkel-Sarkozy Meeting

Merkel and Sarkozy meet today for the first time in 2012 to flesh out a new rulebook for fiscal discipline negotiated at a Dec. 9 summit that seeks to create a “fiscal compact” for the 17-member euro area. They hold a joint press conference at about 1:30 p.m. in Berlin.

Italian Prime Minister Mario Monti will also visit Berlin this week. Sarkozy and Merkel will both travel to Rome on Jan. 20 for negotiations with the Italian government before the next European Union summit meeting in Brussels on Jan. 30.

A report showed that German industrial output (GRIPIMOM) declined in November. Production fell 0.6 percent from October, when it rose 0.8 percent, the Economy Ministry in Berlin said today. Economists had forecast a 0.5 percent drop, according to the median of 30 estimates (GRIPIMOM) in a Bloomberg News survey.

“The outlook for 2012 is highly conditional,” said Frederic Buzare, a fund manager at Dexia Asset Management in Brussels. “If euro-zone members act in unison, demonstrate a shared vision and are specific about the details, this may put a floor underneath the sovereign crisis. It is now likely that, although 2012 will be lost in terms of growth, at least financial stability could be safeguarded, and that’s the bottom line.”

U.S. Earnings Season

Alcoa Inc., the largest U.S. aluminum producer, plans to release results after markets close today, the first company in the Dow Jones Industrial Average (INDU) to report earnings from the final quarter of 2011. Investors will watch to see how the difference in economic growth in the U.S., Europe and Asia affects companies’ earnings.

UniCredit rights (UCGAA), which each entitle holders to buy two new shares in Italy’s largest bank for 1.943 euros, traded at 66.1 euro cents, 51 percent lower than their indicative price at the end of last week. The shares slumped 11 percent to 2.33 euros and were suspended for volatility at least twice.

Nokia, Temenos Fall

Nokia dropped 3.3 percent to 4.02 euros. RF Micro Devices, Nokia’s most important power-amplifier supplier, said sales for the December quarter probably fell 19 percent to about $225 million, the fourth straight quarterly decline. That compared with a previous company forecast of $250 million.

Temenos Group AG (TEMN) sank 5.4 percent to 14.85 Swiss francs after saying Mark Austen resigned from his position on the company’s board of directors with immediate effect. The company had previously announced it would not seek Austen’s re-election at its next shareholder meeting, Temenos said yesterday.

Renault climbed 1 percent to 28.58 euros in Paris after Citigroup upgraded the carmaker to “buy” from “neutral.”

Persimmon Plc advanced 3.9 percent to 499.8 pence, its eighth day of gains for the longest winning streak since 2004. The U.K.’s second-largest homebuilder (PSN) by market value said 2011 results will be toward the top end of analyst estimates. The company said its underlying operating margin will approach 10 percent. Persimmon also forecast a 50 percent increase in pretax profit.

Rentokil Initial Plc (RTO) jumped 3.1 percent to 66.6 pence, its highest price in a month, after Credit Suisse Group AG raised the world’s biggest pest-control company to “outperform” from “neutral.”

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net

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