European stocks snap four-week rally, Aegon, Volkswagen drop
Sunday, 16 August 2009
LONDON Aug. 15 (Bloomberg): European stocks fell for the first week in more than a month as investors speculated share prices have outpaced the outlook for economic growth and companies from Aegon NV to Nestle SA posted lower earnings.
Aegon, the Dutch owner of US insurer Transamerica Corp., slumped 12 per cent, while Nestle, the world's biggest food company, sank 4.4 per cent. Volkswagen AG plummeted 24 per cent after saying it will pay about 3.3 billion euros ($4.7 billion) for a stake in Porsche SE's automotive unit.
Europe's Dow Jones Stoxx 600 Index lost 0.8 per cent to 228.77 this past week, snapping four weeks of gains. A 45 per cent rebound since March 9 has left the regional measure valued at 39.9 times the profits of its companies, the most expensive since September 2003, weekly data compiled by Bloomberg show.
"In the short term you have to be cautious, equities are no longer very cheap," said Manfred Hofer, head of equity analysis at LGT Capital Management in Pfaeffikon, Switzerland, which oversees about $73 billion. "Companies have been able to post profits because of cost cutting. We now need to see economic data confirm an upturn, then it's possible that profits and revenues will increase."
Confidence among US consumers fell in August for the second straight month as concern over jobs and wages grew. The Reuters/University of Michigan preliminary index of sentiment fell to 63.2 from 66 the month before. Economists had forecast an increase to 69, according to the median of 61 projections in a Bloomberg News survey.
"Consumer confidence was clearly below expectations," Hofer said. "The problem in the US is that the economy is consumer-driven."
The euro region's economy contracted 0.1 per cent in the second quarter as Germany and France unexpectedly returned to growth, suggesting Europe's worst recession since World War II is coming to an end. Economists had estimated gross domestic product declined 0.5 per cent in the three months through June, the median of 32 forecasts in a Bloomberg survey showed.
Bank of England Governor Mervyn King said that while recent economic reports are "encouraging," growth won't resume on an annual basis until 2010 while banks restrict access to credit.
National benchmark indexes declined in 10 of the 18 western European markets. The U.K.'s FTSE 100 lost 0.4 per cent, and France's CAC 40 decreased 0.7 per cent. Germany's DAX dropped 2.8 per cent as Daimler AG slid.
Aegon tumbled 12 per cent. The Dutch insurer posted a fourth straight quarterly loss on writedowns and the sale of a unit and said it will sell 1 billion euros of shares to help repay state aid. The second-quarter net loss was 161 million euros, wider than analysts' estimates, and compared with a profit of 276 million euros a year earlier.
Nestle fell 4.4 per cent. The food company reported its first profit decline in six years, withdrew its revenue target and posted sales that missed analysts' estimates after the recession hurt demand for bottled water and vitamin-enriched Nido milk powder.Per-share earnings at companies in the Stoxx 600 have slumped 39 per cent in the second quarter, according to data compiled by Bloomberg, while sales have slipped 16 per cent.
Aegon, the Dutch owner of US insurer Transamerica Corp., slumped 12 per cent, while Nestle, the world's biggest food company, sank 4.4 per cent. Volkswagen AG plummeted 24 per cent after saying it will pay about 3.3 billion euros ($4.7 billion) for a stake in Porsche SE's automotive unit.
Europe's Dow Jones Stoxx 600 Index lost 0.8 per cent to 228.77 this past week, snapping four weeks of gains. A 45 per cent rebound since March 9 has left the regional measure valued at 39.9 times the profits of its companies, the most expensive since September 2003, weekly data compiled by Bloomberg show.
"In the short term you have to be cautious, equities are no longer very cheap," said Manfred Hofer, head of equity analysis at LGT Capital Management in Pfaeffikon, Switzerland, which oversees about $73 billion. "Companies have been able to post profits because of cost cutting. We now need to see economic data confirm an upturn, then it's possible that profits and revenues will increase."
Confidence among US consumers fell in August for the second straight month as concern over jobs and wages grew. The Reuters/University of Michigan preliminary index of sentiment fell to 63.2 from 66 the month before. Economists had forecast an increase to 69, according to the median of 61 projections in a Bloomberg News survey.
"Consumer confidence was clearly below expectations," Hofer said. "The problem in the US is that the economy is consumer-driven."
The euro region's economy contracted 0.1 per cent in the second quarter as Germany and France unexpectedly returned to growth, suggesting Europe's worst recession since World War II is coming to an end. Economists had estimated gross domestic product declined 0.5 per cent in the three months through June, the median of 32 forecasts in a Bloomberg survey showed.
Bank of England Governor Mervyn King said that while recent economic reports are "encouraging," growth won't resume on an annual basis until 2010 while banks restrict access to credit.
National benchmark indexes declined in 10 of the 18 western European markets. The U.K.'s FTSE 100 lost 0.4 per cent, and France's CAC 40 decreased 0.7 per cent. Germany's DAX dropped 2.8 per cent as Daimler AG slid.
Aegon tumbled 12 per cent. The Dutch insurer posted a fourth straight quarterly loss on writedowns and the sale of a unit and said it will sell 1 billion euros of shares to help repay state aid. The second-quarter net loss was 161 million euros, wider than analysts' estimates, and compared with a profit of 276 million euros a year earlier.
Nestle fell 4.4 per cent. The food company reported its first profit decline in six years, withdrew its revenue target and posted sales that missed analysts' estimates after the recession hurt demand for bottled water and vitamin-enriched Nido milk powder.Per-share earnings at companies in the Stoxx 600 have slumped 39 per cent in the second quarter, according to data compiled by Bloomberg, while sales have slipped 16 per cent.