European stocks fall contributes to Asian shares and U.S. futures slid. Dutch Prime minister failure to reach an agreement with a coalition party over austerity measures leads to the fall of European stocks. Details!!!!!
European Stocks Drop as Manufacturing Shrinks; ING Falls
European stocks fell after reports showed manufacturing contracted in the euro area and China and as Dutch Prime Minister Mark Rutte failed to reach an agreement with a coalition party over austerity measures. Asian shares and U.S. futures also slid.
Daimler AG (DAI) and ArcelorMittal (MT) led a selloff in automakers and commodity companies. ING Groep NV (INGA) and Aegon NV (AGN) both tumbled more than 7 percent amid concern the Netherlands may lose its AAA rating. Royal Philips Electronics NV rallied after earnings beat analysts’ estimates.
The benchmark Stoxx 600 dropped 1.8 percent to 253.15 at 11:25 a.m. in London as all 19 industry groups declined. The gauge last week rallied 1.7 percent. The MSCI Asia Pacific Index slid 0.5 percent today, while Standard & Poor’s 500 Index futures expiring in June slipped 1 percent.
“There is every reason for this market to correct today,” said Patrick Moonen, a senior strategist at ING Investment Management in The Hague, which manages $163 billion. “The political environment in Europe has not improved over the weekend and we’ve had some weaker-than-expected macro data that is clearly disappointing. The overall market sentiment has turned bearish, but I am not at all concerned that this is more than a correction.”
Euro-area services and manufacturing contracted more than estimated in April, to a five-month low. A composite index based on a survey of purchasing managers in both industries fell to 47.4 from 49.1 in March, London-based Markit Economics said in an initial estimate. Economists had forecast an increase to 49.3, according to a Bloomberg News survey. A reading below 50 indicates contraction.
Chinese manufacturing also shrank for a sixth month in April, according to a survey of companies. The 49.1 preliminary reading of the purchasing managers’ index from HSBC Holdings Plc and Markit Economics today compares with a final 48.3 the previous month.
In the Netherlands, Rutte will offer his cabinet’s resignation after one of the parties in his minority coalition withdrew support, RTL television reported today, citing an unidentified person.
Rutte was expected to meet today with his cabinet to discuss how to pass a budget that meets European Union targets, before calling early elections.
The cabinet will aim to find a majority for measures to bring the deficit to 3 percent of gross domestic product, Stef Blok, who leads Rutte’s Liberal Party in parliament, said. Geert Wilders’s Freedom Party withdrew its backing for the government on April 21.
Elsewhere, French President Nicolas Sarkozy became the first incumbent since 1958 not to win the first round of the nation’s election.
Socialist Francois Hollande Hollande won 28.5 percent of the vote against 27.1 percent for Sarkozy, the interior ministry said in Paris. The anti-immigrant Marine Le Pen got 18.1 percent, a record for her party that surpassed the predictions of all pollsters. The second round of elections takes place on May 6.
The Stoxx 600 (SXXP) last week snapped a four-week losing streak after the International Monetary Fund raised its global growth forecast and U.S. corporate earnings beat estimates. The gauge has still lost 4 percent so far in April amid renewed concern that the euro-area’s debt crisis is yet to be contained.
The IMF’s spring meetings in Washington over the weekend raised more than $430 billion in pledges to help safeguard the global economy. Managing Director Christine Lagarde fell short of her original $600 billion goal as the U.S. declined to participate and Canada proposed making it harder for Europe to tap aid.
Automakers, Commodity Shares
A gauge of auto-related companies was the worst performer among the 19 industry groups in the Stoxx 600, tumbling 3.1 percent. Daimler lost 3 percent to 39.98 euros, Bayerische Motoren Werke AG (BMW), which today said it expects the pace of sales growth in China to ease, fell 3.7 percent to 67.26 euros and Renault SA (RNO) sank 4.2 percent to 33.99 euros in Paris.
Basic-resource companies also retreated. ArcelorMittal, the world’s largest steelmaker, dropped 4.9 percent to 12.31 euros. Vedanta Resources Plc (VED) declined 4.5 percent to 1,182 pence and Antofagasta Plc (ANTO) dropped 2.6 percent to 1,148 pence.
Dutch Financial Companies
ING Groep, the largest Dutch financial-services company, dropped 7.6 percent to 5.15 euros as Dutch 10-year bonds fell, driving the yield difference to German bunds to a three-year high. Aegon, owner of U.S. insurer Transamerica Corp., plunged 9 percent to 3.31 euros and SNS Reaal NV (SR), a Dutch lender and insurer, plunged 9.3 percent to 1.40 euros.
“The risk has heightened the Netherlands may be downgraded and lose its AAA rating,” Nick Kounis, head of macro research at ABN Amro Group NV in Amsterdam, said in a telephone interview yesterday. “I don’t see a majority in parliament to bring the deficit to 3 percent. So hopefully the politicians will get their act together as the country has a long history of fiscal prudence,” Kounis said.
Deutsche Bank AG (DBK) paced a selloff in European banks, falling 3.6 percent to 33.26 euros in Frankfurt. Germany’s largest lender will probably book an additional charge of as much as 400 million euros ($528 million) tied to the sale of Actavis Group hf, according to people familiar with the transaction.
Natixis (KN) retreated 5.8 percent to 2.18 euros and Credit Agricole SA (ACA) lost 3.8 percent to 3.60 euros in Paris trading, while KBC Groep NV (KBC) lost 6.8 percent to 13.08 euros in Belgium.
Philips’ Earnings Beat
Philips limited losses in Amsterdam, rallying 4.9 percent to 15.04 euros, after the world’s biggest light-bulb maker reported profit that beat analysts’ estimates after cutting costs and selling assets.
Earnings before interest, taxes and amortization rose to 552 million euros ($728 million) from 438 million euros a year earlier. Analysts surveyed by Bloomberg expected 439 million euros. Excluding disposal proceeds, profit fell.
Cable & Wireless Worldwide Plc (CW/) rallied 15 percent to 36.75 pence after Vodafone Group Plc (VOD) agreed to buy the U.K. company for 1.04 billion pounds ($1.7 billion). The world’s largest wireless operator offered 38 pence a share after India’s Tata Communications Ltd. last week failed to agree on a price.
Danone (BN) gained 3 percent to 54 euros after Nestle SA (NESN) agreed to buy Pfizer Inc.’s baby-food unit for $11.9 billion, edging out the French company in a contest for a business that gets most of its sales in emerging markets.
Nestle’s offer beat a bid of about $11 billion from Danone, according to a person with knowledge of the matter. Nestle gained 1.4 percent to 55.90 euros in Zurich. (Sarah Jones – Bloomberg)