Tuesday, September 25, 2007

European Stocks Decline, Paced by Total, Anglo American, BP

By Adria Cimino

Sept. 25 (Bloomberg) -- European stocks fell for a second day as a retreat in crude prices pushed energy shares lower and mining companies snapped a five-day rally.

Total SA and Anglo American Plc led declines by oil and mining companies, Europe's best-performing stocks this month. BP Plc slid after a report that the company plans to announce staff cuts amid the worst financial showing since 1993. Deutsche Bank AG retreated after Merrill Lynch & Co. cut its estimate for the German bank's third-quarter earnings.

The Dow Jones Stoxx 600 Index lost 1.3 percent to 371.57 at 2:15 p.m., as all 18 industry groups fell except utilities. The index has retreated 5.2 percent so far this quarter, heading for its first decline since the period ended in June 2006, on concern turmoil in the credit markets will hurt economic growth.

``There's no doubt that investors are expecting further bad news,'' said Alan Borrows, who helps oversee $2.8 billion at Midas Capital Partners in Liverpool, England. ``The credit crunch issues are eventually going to feed through into the economy.''

The yen gained versus the pound and the euro on speculation credit market losses will damp business and consumer confidence in Europe. The risk of owning European corporate bonds rose, according to traders of credit-default swaps. U.S. Treasuries gained.

Business confidence in Germany, Europe's biggest economy, fell more than economists forecast this month, reaching a 19- month low, a report showed today.

Sales of previously owned U.S. homes fell in August to a five-year low and consumer confidence ebbed, economists said before reports later today.

Total, BP

Total, Europe's third-biggest oil company, retreated 1.3 percent to 57.36 euros. Statoil ASA, Norway's largest oil producer, declined 2.2 percent to 186 kroner.

Crude fell in New York as U.S. producers in the Gulf of Mexico increased output after a storm threat passed. Crude for November delivery sank as much as 1.3 percent to $79.89 on the New York Mercantile Exchange.

BP, Europe's second-largest oil company, lost 2.5 percent to 574.5 pence. Chief Executive Officer Tony Hayward plans to announce a company shake-up next month, the Financial Times reported, citing notes from a staff meeting that were distributed by an unidentified manager. BP spokesman Neil Chapman, when reached on his cell phone, declined to comment on the FT report.

Anglo American, Rio Tinto

Anglo American, the world's second-biggest mining company, sank 3.5 percent to 3,162 pence. Rio Tinto Group, the third- largest, slid 2.4 percent to 4,103 pence.

Copper, gold and silver declined in London.

A measure for basic resources companies in the Stoxx 600 fell 2.9 percent after five days of gains.

``People are locking in profits on oil and basic-resources shares,'' said Arnaud Scarpaci, who helps manage the equivalent of about $210 million at Agilis Gestion in Paris.

National benchmarks decreased in all of the 18 western European markets except Greece. France's CAC 40 lost 1 percent as did the U.K.'s FTSE 100. Germany's DAX dropped 0.6 percent. The Stoxx 50 declined 1.1 percent, while the Euro Stoxx 50, a measure for the euro region, retreated 0.8 percent.

Deutsche Bank lost 1.1 percent to 89.19 euros. Merrill Lynch cut its third-quarter adjusted earnings-per-share estimate for the German bank by 15 percent.

`Under Pressure'

``Banks are under pressure,'' said Franck Hennin, a fund manager at Richelieu Finance in Paris, which oversees $5 billion. ``The industry is having a difficult time estimating its exposure to subprime and its losses. The hour of selection has come.''

Concern that turmoil in the credit market will weigh on earnings has pushed Stoxx 600 banking stocks index down 11 percent so far this quarter.

Credit Agricole SA, France's second-biggest bank, slipped 2.1 percent to 26.79 euros after Merrill added the shares to the firm's ``least preferred'' list.

``We have now changed from `will we have a serious bank crisis?' to `who is the winner, who is the loser?''' said Bernhard Maeder, vice president of portfolio management at Credit Suisse Asset Management in Zurich.

Arcelor Mittal, the world's largest steelmaker, dropped 0.9 percent to 54.48 euros. The company will spend $35 billion on new plants to expand capacity, the Financial Times reported, citing Chief Executive Officer Lakshmi Mittal.

OMV, Air France

OMV AG sank 5.5 percent to 48.76 euros. Central Europe's biggest oil company said it's ready to bid 2.8 trillion forint ($15.7 billion) for the shares in Hungarian oil refiner Mol Nyrt. it doesn't own to create a large-scale regional energy supplier.

Air France-KLM Group, Europe's largest airline, gained 3.2 percent to 25.14 euros. The company's targets will be ``very easily hit,'' Chief Executive Officer Jean-Cyril Spinetta told La Tribune in an interview. Four-month reservations are excellent, he said in the newspaper.

Signet Group Plc, the world's largest specialty jewelry retailer, rose 1.8 percent to 83.5 pence. The shares were upgraded to ``buy'' from ``neutral'' at Merrill Lynch.

The shares have dropped 30 percent this year, but ``the key long-term fundamentals of Signet's business model have not changed materially, if at all,'' analysts including London-based Mal Patel wrote in a research note dated today. ``The downside risks from these levels are limited.''

Last Updated: September 25, 2007 09:19 EDT

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