BLBG: European Stocks Decline to Seven-Week Low as SAP Retreats
European stocks fell to a seven-week low amid concern that equity valuations have overshot the potential for economic growth and earnings. U.S. index futures rose, while Asian shares declined.
The Stoxx Europe 600 Index dropped 0.4 percent to 329.64 at 12:47 p.m. in London, taking its losses this month to 3.9 percent. Germany’s DAX Index extended its slump from a record reached in July to as much as 10 percent, with business-software maker SAP SE tumbling the most since July 2013 after a report it will implement a job freeze until 2015.
“Two issues are noticeable: one, the pace at which markets rushed down recently,” said Roger Peeters, chief executive officer at Close Brothers Seydler Research in Frankfurt. “Two, the mixture of different bearish drivers: growth concerns but also the high valuation of the markets and several smaller issues, which are also a burden.”
The Stoxx 600 trades at 14.7 times the projected earnings of its members, down from 15.7 times on Sept. 19 and still higher than the five-year average of 12.6 times. The index has lost 5.6 percent since Sept. 4 amid concern the European Central Bank’s stimulus package won’t be enough to revive the euro-area economy and as the International Monetary Fund cut global-growth forecasts.
The DAX fell 0.4 percent today, heading for a two-month low. The gauge retreated 1.3 percent yesterday as German industrial production contracted the most in more than five years. The MSCI Asia Pacific Index decreased 1.2 percent.
Fed, Earnings
Standard & Poor’s 500 Index futures added 0.3 percent before the Federal Reserve publishes the minutes of its Sept 16-17 meeting. The document, due at 2 p.m. in Washington, may reveal clues about the Fed’s thinking on the timing of an interest-rate increase. Forecasts for higher rates in mid-2015 are reasonable as officials wait for unemployment to fall further and inflation to rise, New York Fed President William C. Dudley said yesterday.
Third-quarter results from Alcoa Inc. (AA) today will mark the unofficial start of the U.S. earnings-reporting season. In Europe, about 150 Stoxx 600-listed companies including Royal Philips NV, GlaxoSmithKline Plc, ABB Ltd. and Nokia Oyj report earnings this month.
“At the start of earnings, we tend to see a choppy market, so I want to see how the first couple of earnings come in, like Alcoa tonight,” Benno Galliker, a trader at Luzerner Kantonalbank AG in Lucerne, Switzerland, said by telephone. “Often the second half of October is much better than the first half. So far I don’t see any panic.”
The volume of shares changing hands in Stoxx 600-listed companies was 50 percent higher than the 30-day average for this time of the day, according to data compiled by Bloomberg.
SAP Tumbles
SAP fell 4.1 percent to 53.62 euros, its lowest price since March 2014. The company will freeze hiring until 2015 in order to reduce costs, Boerse Online reported, citing an e-mail from Chief Financial Officer Luka Mucic to managers.
Air France-KLM Group lost 2 percent to 6.54 euros, the lowest price in almost 13 months. The strike that affected flights for two weeks last month may cut annual profit by 500 million euros ($632 million), the carrier said.
FirstGroup Plc dropped 3.4 percent to 111.2 pence, its lowest price this year, after losing the ScotRail train-service franchise it has operated for 10 years. The Scottish government awarded the 2.5-billion pound ($4 billion) operation to Abellio, a Dutch operator.
Swisscom AG rose 4 percent to 554.50 Swiss francs after Reuters reported Switzerland’s largest phone carrier is working with UBS AG on a possible sale of its Italian broadband unit.
Fiat SpA gained 1 percent to 7.32 euros. Sergio Marchionne, Fiat’s chief executive officer and the architect of its merger with Chrysler, said he sees potential for the fragmented auto industry to create one carmaker larger than the current leader Toyota Motor Corp.
To contact the reporter on this story: Inyoung Hwang in London at ihwang7@bloomberg.net
To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net Srinivasan Sivabalan
