European & Asian Stocks Decline On Concerns Over U.S. Economic Weakness

Discussion in 'Wall St. News' started by ByLoSellHi, Mar 31, 2007.

  1. Two articles, by Bloomberg, published today. I didn't want to create two separate threads.

    European Stocks Decline on U.S. Economic Reports, Price of Oil

    By Sarah Thompson

    March 31 (Bloomberg) --
    European stocks declined this week as economic reports in the U.S. fueled concern that earnings growth worldwide may slow more than expected and oil prices rose after Iran seized 15 British sailors in the Persian Gulf.

    ``Earnings are expected to snap the run of double-digit growth'' in Europe, said Jane Drake, who helps oversee $10.4 billion as investment director at Tilney Investment Management in Liverpool, U.K. ``We've had a lot of economic data that has raised concerns about growth, inflation and housing.''

    SAP AG, Axa SA and Lafarge SA led declines by companies reliant on sales in the U.S., while British Airways Plc retreated as the climb in oil prices raised fuel costs.

    The Dow Jones Stoxx 600 index decreased 0.5 percent this week to 374.22. The measure rose 2.5 percent in the first three months of the year, its third consecutive quarterly advance.

    The Stoxx 50 fell 0.9 percent, and the Euro Stoxx 50, a gauge for the 13 nations using the euro, dropped 0.3 percent.

    France's CAC 40 fell less than 0.1 percent while Germany's DAX increased 0.3 percent. The U.K.'s FTSE 100 retreated 0.5 percent.

    Vodafone Group Plc, the world's largest mobile-phone company, led telecom shares lower after reporting shrinking profit margins and saying competitive and regulatory pressure will continue in Europe.

    Amvescap Plc fell after the mutual-fund operator was sued by three bond managers who want to defect to Deutsche Bank AG, saying they are trapped in ``indentured servitude'' by restrictive employment contracts.

    U.S. Economic Data

    Reports on March 26 and March 27 showed respectively U.S. home sales unexpectedly declined and consumer confidence slid more than economists forecast. The data deepened concern that a housing crisis will stifle growth in Europe's largest export market.

    Stocks extended losses March 28 after Federal Reserve Chairman Ben S. Bernanke said inflation remains ``uncomfortably high'' and uncertainties about the growth outlook have risen ``somewhat.''

    Earnings growth of Stoxx 600 companies will slow to 6.2 percent on average this year, according to estimates compiled by FactSet Research Systems, compared with 14.6 percent for 2006.

    SAP, the world's largest maker of business-management software and which gets about 28 percent of its revenue from the U.S., retreated 2.6 percent to 33.37 euros. Axa, which receives about 16 percent of sales from North America and is Europe's second-largest insurer, lost 1.5 percent to 31.74 euros.

    Lafarge, the world's largest cement maker, decreased 0.5 percent to 117.69 euros. It gets about 30 percent of its sales from the U.S.

    BA Declines

    British Airways Plc, Europe's third-largest airline, fell 6.2 percent to 486 pence. Approximately 30 percent of airlines' costs are related to oil prices, according to research by Credit Suisse Group.

    BP Plc, Europe's second-largest oil company, added 1.9 percent to 552 pence. Lundin Petroleum AB, Sweden's largest oil producer, increased 1.9 percent to 82.75 Swedish kronor.

    Crude oil traded near a six-month high, as 15 British naval personnel seized in the Persian Gulf remained in Iranian custody for an eighth day, heightening concern the standoff will threaten oil shipments from the region.

    Vodafone Margins

    Shares of Vodafone slipped 4.1 percent to 135.5 pence on concern that operating profit margins in the U.K. are shrinking.

    For the five months ended February 2007, earnings before interest, taxes, depreciation and amortization as a percentage of sales at Vodafone's U.K. unit were 26.6 percent, Newbury, England-based Vodafone said yesterday in a statement.

    The U.K. Ebitda margin was 30.8 percent in the fiscal year ended March 31, 2006.

    The company also warned competitive and regulatory pressure will continue in Europe in fiscal 2008.

    ``While revenue growth is probably ahead of expectations, the Ebitda margin appears to be lower,'' said Jesper Kruger, who helps manage about $64 billion as an investment manager at ATP in Copenhagen. ``It would appear that the days of 30 percent margins in the U.K. are over.''

    BT Group Plc, the U.K.'s largest telephone company, slid 1.1 percent to 303.75 pence. Telekom Austria AG dropped 0.7 percent to 18.71 euros.

    ``The fact that one of the big guys in the sector, and the market, is making negative noises around margins in a historically high-margin business is clearly cause for concern,'' Kruger said.


    Amvescap declined 8.2 percent to 560 pence. The lawsuit came two days after Atlanta-based Amvescap sued the New York- based fund unit of Deutsche Bank, claiming the company staged an illegal raid to lure away 16 members of its bond group.

    Amvescap's shares fell 5 percent March 28 on concern its earnings would be hurt by the loss of the bond team, which helps manage one fifth of the company's $463 billion in assets.

    The three executives, Stephen Johnson, Kenneth Bowling and James Guenther, cited compensation issues in their suit. They seek to end their employment as well as unspecified damages. The job contracts they signed required 12-month written resignation notices, according to the suit filed by Amvescap's Louisville, Kentucky-based Invesco International Inc. unit.

    BASF AG gained 6.7 percent to 84.28 euros. The world's largest chemicals maker will shut an amino-acid factory in South Korea and plans to open a plastics facility in Asia with Solvay SA. Solvay, Belgium's largest chemical and pharmaceutical company, added 2.8 percent to 115.04 euros. Arkema SA, the chemicals maker spun off from Total SA, rose 7.3 percent to 42.92 euros.

    Taylor Woodrow

    Shares of Taylor Woodrow Plc advanced 16.4 percent to 489.5 pence after the company agreed to merge with George Wimpey Plc, sparking speculation about a counter-offer and further consolidation in the 20 billion-pound ($39 billion) industry.

    Shares of Taylor surged 13 percent March 26, their biggest jump since Feb. 25, 2000, after the Solihull, England-based company said it and Wimpey would merge to form Britain's biggest builder.

    Taylor Wimpey Plc will have annual revenue of 6.7 billion pounds and 31,000 home sales a year at sites from London to Texas.

    Vallourec SA increased 10 percent to 191.58 euros. The French maker of steel tubes used to carry oil and gas rose the most in six months March 28 on speculation Arcelor Mittal may be preparing a bid. Lakshmi Mittal denied his company is considering an offer.

    `No Interest'

    ``At this time we have no interest in Vallourec,'' Mittal told reporters yesterday in Brussels. Arcelor Mittal, the world's largest steel company, has announced a pipe and tube project in Saudi Arabia, a joint venture with a Saudi partner, as part of its strategy, he said.

    Vallourec spokeswoman Marie-Laurence Bouchon in Paris said the company doesn't comment on ``rumors.''

    Scottish & Newcastle Plc, the U.K.'s largest brewer, surged 9.9 percent to 601.5 pence on speculation the company may get a bid from Heineken NV.

    The British brewer, based in Edinburgh, has a market value of about 5.3 billion pounds. Amsterdam-based Heineken, which sells beer in more than 170 countries, has a capitalization of 19 billion euros ($25 billion).

    ``There is a rumor that Heineken is about to bid for Scottish & Newcastle,'' said Marcel Hooijmaijers, an analyst at Kepler Equities in Amsterdam, who recommends investors buy the Dutch brewer's shares. ``Heineken has shown interest before in entering the U.K.''

    Robert Ballantyne, a spokesman for Scottish & Newcastle, wasn't immediately available. Heineken spokeswoman Veronique Schyns declined to comment ``on market rumors.''

    M&A to Continue

    ``Mergers and acquisitions will continue and that's an element of support for stocks,'' said Jean-Luc Enguehard, chief executive officer at La Banque Postale Asset Management in Paris, which oversees $38 billion. ``In the short term, we're more cautious. There's the difficulty of the housing data yesterday. The risk is of a contamination of the rest of the economy.''

    Companies including Corus Group Plc, the U.K.'s biggest steelmaker, and Bloomsbury Publishing Plc, the publisher of the Harry Potter novels, are due to release earnings next week. Quadrant AG, the Swiss maker of plastics used by carmakers, and Boehler-Uddeholm AG, the Austrian specialty steelmaker, are also to publish results.
  2. Asian Stocks Fall for Week on U.S. Economic Outlook; Sony Drops

    By Chen Shiyin

    March 31 (Bloomberg) --
    Asian stocks slid this week after reports pointed to slowing U.S. economic growth and as Federal Reserve Chairman Ben S. Bernanke said inflation remains a risk.

    Sony Corp. and Samsung Electronics Co. led declines among companies that rely on sales to the U.S., the region's largest export market.

    ``The U.S. economy remains a concern to Asian suppliers,'' said Barro Liao, who helps manage $2.7 billion at PCA Securities Investment Trust Co. in Taipei. ``A faltering U.S. economy will not leave much room for growth in Asia.''

    Energy stocks rose, led by PetroChina Co. and Woodside Petroleum Ltd., after oil prices climbed to the highest in more than six months.

    The Morgan Stanley Capital International Asia-Pacific Index lost 0.9 percent to 144.65 in the previous five days, sliding for the fourth time in five weeks. Declines this week trimmed the measure's gain in the first three months of the year to 2.9 percent.

    Japan's Nikkei 225 Stock Average slid 1.1 percent, while the broader Topix index dropped 1.6 percent. Tokyo Electric Power Co. led the nation's utilities lower after the Japanese government tightened rules on reporting nuclear accidents. Benchmarks also fell in Thailand, Pakistan and India, and gained elsewhere.

    In the U.S., the Standard & Poor's 500 Index dropped 1.1 percent this week after consumer confidence, home prices and new housing sales declined.

    Bad Indicators

    Sony, the world's second-largest maker of consumer electronics, lost 3.9 percent this week. Samsung, which accounted for about 16 percent of South Korean exports last year, fell 2.9 percent. Toyota Motor Corp., Japan's largest automaker, slipped 3.7 percent. It made about a third of fiscal 2006 revenue in North America.

    The U.S. Conference Board's index of consumer confidence dropped to 107.2 this month from 111.2 in February. Spending accounts for more than two-thirds of the U.S. economy. Meanwhile, home values fell 0.2 percent in January from a year earlier, according to the S&P/Case-Shiller Index, a measure of home prices in 20 U.S. metropolitan areas. The decrease was the first since the group started compiling the measure in January 2001.

    The reports came after a day after new-home sales in the U.S. dropped 3.9 percent to an annual pace of 848,000 in February. Economists had predicted they would rise to a 985,000 rate, according to a Bloomberg News survey.

    ``The U.S. depends hugely on spending, so if consumption is hit, so is the whole economy,'' said Park Seh Ick, who helps manage about $1.3 billion at Hanwha Investment Trust Management Co. in Seoul. ``I think the U.S. indicators that we'll see in the second quarter will be quite bad.''

    `Greater Risk'

    Shares also retreated after Bernanke said in testimony before Congress on March 28 that inflation is a ``greater risk'' than slower growth, spurring concern the Fed may be unwilling to lower interest rates to prop up the economy.

    James Hardie Industries NV, the biggest supplier of home siding in the U.S., declined 2.2 percent, its seventh consecutive weekly loss. Taiwan Semiconductor Manufacturing Co., the world's largest maker of customized computer chips, lost 3 percent.

    ``Bernanke appears to be more conservative in his view that inflation is a greater risk,'' said Jay Moghe, who manages $150 million at Opes Prime Asset Management in Singapore. ``Markets have clawed back some of their gains after the sell-off in late February and March but they'll need to see better news in terms of rates to return to where they left off.''

    Oil Shares Gain

    The MSCI Asia-Pacific Energy Index jumped 3.2 percent this week, the biggest advance among the regional measure's 10 industry groups. Crude oil for May delivery climbed 5.8 percent to $65.87 a barrel on the New York Mercantile Exchange, closing on March 29 at its highest since Sept. 8.

    PetroChina, the nation's largest oil explorer, gained 5.6 percent this week. Woodside Petroleum, Australia's second- largest oil producer after BHP Billiton Ltd., surged 6.9 percent, while Inpex Holdings Inc., Japan's largest, jumped 7.6 percent.

    ``Resources stocks make up a significant part of the market,'' said Hans Kunnen, who helps manage $70 billion at Colonial First State Investment Management Australia Ltd. in Sydney. ``In the absence of overarching economic or earnings news, they tend to rise in line with commodities prices, like oil.''

    Tokyo Electric, Japan's No. 1 power producer, slumped 6.9 percent this week. Kansai Electric Power Co., the second largest, fell 11 percent. Chubu Electric Power Co. tumbled 9.4 percent.

    Chubu Electric, Tokyo Electric and Tohoku Electric Power Co. admitted this month they failed to report accidents during routine shutdowns over the past three decades.

    Scandals Emerging

    Tokyo Electric said on March 22 an accident that may have occurred at its Fukushima Daiichi plant in 1978 could have caused a nuclear chain reaction. Hokuriku Electric Power Co. was ordered to halt operations at its Shika No. 1 reactor on March 15 after the company said it covered up an accident eight years ago.

    ``Successive scandals involving power producers have been coming to light,'' said Hideyuki Ookoshi, who oversees $365 million at Chiba-Gin Asset Management Co. in Tokyo. ``There's concern more scandals will emerge, and that's causing the shares to be sold off.''

    China's CSI 300 Index gained 2.4 percent this week, the region's biggest advance, on speculation the government will approve an additional $6 billion quota for overseas investors to buy local-currency shares.

    The new quota, which is being discussed and awaiting approval by the Chinese government, the official China Daily newspaper reported. Overseas investors are allowed to invest in A shares through the so-called qualified foreign institutional investor, or QFII, program. The current quota is $10 billion.

    `Great News'

    ``A likely increase of the QFII quotas is great news for the market,'' said Lu Yizhen, who helps manage about $640 million at Citic-Prudential Fund Management Co. in Shanghai. ``The government will keep adding QFII quotas at a controlled pace.''

    China is studying ways to expand the investment quota for foreign investors, the State Administration of Foreign Exchange's Director Hu Xiaolian told reporters in Beijing on March 5.

    Industrial & Commercial Bank of China, which this week overtook Bank of America Corp. as the world's second-most valuable financial firm, gained 6.6 percent in Shanghai. Bank of China Ltd., the nation's second-largest lender, gained 6.7 percent.

    Shares also gained after Industrial Bank Co., a Chinese lender in which HSBC Holdings Plc has a stake, said 2006 profit soared 54 percent from a year earlier to 3.8 billion yuan ($491 million) because the nation's economic growth led to increased borrowing and reduced bad loans. The stock jumped 9.2 percent.