European stocks decline for a fifth day as Espirito Santo sinks
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London: European stocks fell for a fifth day as shares of lenders declined to their lowest level this year. US index futures and Asian equities also slid.
Banco Espirito Santo SA tumbled 17%, dragging the Portuguese benchmark PSI 20 Index down for its biggest seven-day drop since August 2011. Fugro NV sank the most since November 2012 after predicting a drop in profit margin and a write-off of as much as €350 million ($477 million). Gerresheimer AG and Tryg A/S climbed after posting quarterly earnings that exceeded analysts’ estimates.
The Stoxx Europe 600 Index fell 1.2% to a two-month low of 335.77 at 12:34 pm in London, extending its five-day decline to 3.8%, the most since March. Investors are weighing valuations near the highest levels since 2009, while concern is rising over signs that the euro-area recovery remains fragile. Standard & Poor’s 500 Index futures lost 0.8% on Thursday, while the MSCI Asia Pacific Index slid 0.1%.
“We’ve seen a lot of money go into the periphery earlier this year, and banks have a fairly big weighting in those regions,” said Veronika Pechlaner, who helps oversee $2.3 billion at Jersey, Channel Islands-based Ashburton Ltd. As investors revisit their positions, sentiment can turn quite quickly. The potential for banks to beat earnings this quarter is very limited, so investors think it’s prudent to take money away from the table.
A gauge of lenders in the region sank 2.5%, falling the most among 19 industry groups. Banco Espirito Santo led the losses, tumbling 17% to 51 euro cents. Espirito Santo International SA is considering making a request for protection from creditors in Luxembourg if it can’t reach a debt renegotiation agreement with its main creditors, Diario Economico reported, without saying how it obtained the information.
Banque Privee Espirito Santo SA, fully owned by Espirito Santo Financial Group SA, said on 8 July that there was a delay in payments of some of the last maturities of short-term debt securities issued by ESI. The firm is fully owned by ESFG, which controls 25% of Portugal’s second-biggest bank by market value, and suspended trading in its shares and bonds on Thursday.
Portugal’s PSI 20 tumbled 4.4%, the most among 18 western-European markets, sending its seven-day slump to 12%. The index trades at its lowest level since October.
Spain’s IBEX 35 slipped 2.4%, the most in almost two months. Italy’s FTSE MIB retreated 2.1%, while Greece’s ASE decreased 2.5%.
The value of equities in Portugal, Spain, Italy and Greece is falling after rising 13% in the first six months of 2014, compared with a 2% gain for the market capitalization of stocks in the UK, Germany and France. The ratio between the two reached an almost three-year high. The last time shares in the so-called peripheral European nations rallied so much relative to those in the biggest economies, they lost about half their value in the following year.
All western-European markets fell except Iceland on Thursday, with the UK’s FTSE 100 dropping 0.9% and Germany’s DAX losing 1.4%. France’s CAC 40 slipped 1.5% to its lowest level since March.
The Stoxx 600 traded at 15.3 times the estimated earnings of its members yesterday, after its valuation reached 15.7 times last week, the most since the end of 2009, according to data compiled by Bloomberg.
Exports from China climbed 7.2% in June from a year earlier, according to the customs administration in Beijing. That trailed the 10.4% median estimate of economists in a Bloomberg News survey. Imports gained 5.5%.
In the US, some Federal Reserve policy makers expressed concern that investors may be getting too complacent, minutes of their June meeting released yesterday showed. They agreed to end their bond-buying program in October if the economy holds up. Fed Bank of St. Louis president James Bullard said a rapid drop in joblessness will increase early next year.
In the UK, the Bank of England kept its benchmark interest rate at 0.5% and its asset-purchase target at £375 billion ($643 billion), as forecast by economists.
Fugro sank 19% to €33.08. The deepwater- oilfield surveyor said it expects a write-off of €300 million to €350 million, most of it in its Geoscience division. First-half margin on earnings before interest and taxes will be in the low-single digits, compared with a 11.4% margin a year earlier, the Dutch company said, citing project delays because of slower capital spending and a weakening oil and gas market.
DNB ASA dropped 4.5% to 110.10 kroner. Norway’s largest bank reported that second-quarter net income rose to 4.65 billion kroner ($760 million), missing analysts’ forecasts for 4.83 billion kroner.
London Stock Exchange Group Plc fell 2.8% to 1,901 pence. Qatar sold about one-third of its stake in the company, terms obtained by Bloomberg News showed. The stake was offered at 1,900 pence to 1,956 pence a share.
Skanska AB lost 2.5% to 147.10 kronor. The Nordic region’s biggest construction company by global revenue said it will scale down operations in Latin America after booking 500 million kronor ($73.7 million) in project writedowns and restructuring costs. Skanska also said it expects second-quarter operating profit of 920 million kronor. Analysts estimated earnings before interest and taxes of 1.36 billion kronor.
Gerresheimer climbed 6 percent to €53.24 after the maker of syringes and inhalers posted second-quarter adjusted earnings before interest, taxes, depreciation and amortization of €65.1 million, surpassing the average analyst projection of €62.4 million.
Tryg added 1.8% to 561.50 kroner. The Danish property and casual insurer reported second-quarter profit of 869 million kroner ($159 million). Analysts on average had predicted 626 million kroner.
Suedzucker AG rose 3% to €15.35. The sugar producer reported first-quarter revenue of €1.77 billion, compared with the average estimate of €1.76 billion. Bloomberg