The Wall Street Journal-20080111-Stocks in Europe Slump to 15-Month Low
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Stocks in Europe Slump to 15-Month Low
LONDON -- European shares closed at a 15-month low, as the Bank of England decided to keep interest rates steady and the European Central Bank suggested it is willing to raise them.
That overshadowed well-received sales reports from British supermarket chain J Sainsbury and German retailer Metro. The reports should have been a welcome break for the retailing sector, which has been hammered in recent days by disappointing results and cautious outlooks.
The pan-European Dow Jones Stoxx 600 index fell 1% to 345.38, its lowest point since Oct. 5, 2006. The index has dropped 5.3% so far this year after posting a small loss for all of 2007.
The central banks' stance and comments from ECB President Jean- Claude Trichet -- that policy makers may raise rates to fight inflation -- kept investors nervous about economic prospects and in turn affected companies whose earnings are sensitive to an economic slowdown.
"Current valuations are losing importance as a support factor. The fears of a profit recession have increased again substantially since the beginning of the year," said Gerhard Schwarz, head of global equity strategy at UniCredit Markets. "Given this deterioration in the environment, cyclicals are increasingly coming under pressure."
Chemical stocks, one group that is particularly sensitive to economic growth, fell sharply. Norwegian fertilizer firm Yara International, which had risen sharply in recent days, dropped 5.8%, while Germany's BASF shed 4.8%. Syngenta sank 5.6% in Zurich.
U.K. mortgage lender Alliance & Leicester fell 4%, and banking group HBOS dropped 4.3% as fears about consumer-spending trends held sway.
"Financial stress has reached middle England, as evidenced by Marks & Spencer's performance over the past couple of days," said Oliver Russ, a partner at Argonaut Capital in London who helps manage GBP 1.3 billion ($2.5 billion) in stocks. "The Bank of England must act more quickly to stave off recession."
Marks & Spencer, which plunged 19% Wednesday on poor quarterly results, fell 3.5% yesterday. It has skidded 29% this month. Several other U.K. retailers have depicted a gloomy Christmas, and some economists thought the Marks & Spencer results would push the Bank of England toward cutting interest rates this month.
Among major national markets, the U.K.'s FTSE 100 index fell 0.8% to 6222.70, while France's CAC 40 index shed 0.6% to 5400.43 and Germany's DAX 30 fell 0.9% to 7713.09. All are at their lowest points since late November.
Many retailers turned lower after the central banks' decisions. Fashion chain Next fell 2.8% and Swedish clothing chain Hennes & Mauritz retreated 3.5%.
Quarterly sales figures from J Sainsbury and Metro, the German owner of supermarkets as well as the Media Markt consumer-electronics stores, pushed Sainsbury up 6.3% and Metro up 6.2%.
Luxury-goods maker Burberry gained 3.7% after J.P. Morgan upgraded the firm to "overweight" from "neutral," saying bearish sentiment is overdone.
Oil and gas firms were under pressure as crude-oil prices dropped nearly $2 a barrel in New York. France's Total and Anglo-Dutch Royal Dutch Shell were down 1.7% and 1.3%, respectively.
Logitech International rose 5.8% amid speculation Microsoft might follow its $1.2 billion acquisition of Fast Search & Transfer with a buyout of the Swiss-American maker of computer peripherals.
Japan and India
Each Decline 1.4%
Most Asian markets fell yesterday, as Japanese investors fretted about slower growth at home and traders in Hong Kong worried their market may be near the end of its bull run.
Indian stocks set another intraday high before ending lower, as investors turned cautious ahead of today's release of earnings from bellwether Infosys Technologies.
In TOKYO, the Nikkei Stock Average of 225 companies fell 1.4% to 14388.11, after gaining in the previous two sessions. The index is down 6% so far this year.
Resource stocks fell on weaker crude prices. Oil producer Inpex sank 7.1% and Nippon Oil dropped 4.1%. Tokyo Electron jumped 2.6% after it said orders for its chip and flat panel display-making equipment rose 55% in the latest quarter.
In HONG KONG, the Hang Seng Index dropped 1.4% to 27230.86, while the Hang Seng China Enterprises Index declined 0.7% to 16027.69.
Cheung Kong (Holdings) fell 3.4% as a group of holders sold HK$4.71 billion ($603.2 million)cq of shares in the property firm at a 3.8% discount to Wednesday's close.
China Petroleum & Chemical Corp., Sinopec, fell 6.4% and power utility Huaneng Power International slumped 4.9% after the Chinese government late Wednesday moved to freeze regulated prices of energy and other utilities to control inflation. In Shanghai, where the companies' yuan-denominated Class A shares are traded, Sinopec fell 2.8% and Huaneng Power declined 3%.
In SHANGHAI, the Shanghai Composite Index, which tracks both Class A shares and foreign-currency Class B shares, rose 0.4% to 5456.54.
In MUMBAI, India's benchmark Sensitive Index fell 1.4% to 20582.08. Technology shares fell on fears Infosys's earnings will be lower than expected. Infosys lost 3.2%. Tata Motors shed 2.8%, reversing early gains on the launch of its new small car, the Nano.
Australia's S&P/ASX 200 index slipped 0.1% to 6078.70, its fourth straight decline. Losses for the year reached 4.1%. Alumina dropped 2.5% after the aluminum producer cut its full-year earnings forecast by 17%, citing lower aluminum prices, higher costs and a stronger Australian currency.
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V. Phani Kumar contributed to this article.
