David Buik Comments: European Stocks Fall As Fed Considers Cutting Stimulus

January 4, 2013, Bloomberg Businessweek

European (SXXP) stocks declined from a 22- month high as investors awaited U.S. jobs data, and Federal Reserve minutes showed policy makers debated ending their bond- purchase program. U.S. index futures were little changed, while Asian shares fell.

Fresnillo Plc (FRES), the world’s biggest primary silver wwwucer, slid 5.6 percent after the shares were downgraded at UBS AG. Randgold Resources Ltd. led gold wwwucers lower, falling 3.3 percent as the price of the metal declined. Sonova Holding AG (SOON), the Swiss maker of hearing health-care wwwucts, rose after Bank of America Corp. upgraded its rating on the stock.

The Stoxx Europe 600 Index lost 0.2 percent to 286.20 at 11:10 a.m. in London. The gauge closed at its highest level since February 2011 yesterday and is headed for a weekly gain of 2.6 percent. Futures on the Standard & Poor’s 500 Index expiring in March were little changed, while the MSCI Asia Pacific Excluding Japan Index retreated 0.4 percent.

“There is obviously severe doubt in the mind of many of the members of the Federal Reserve that quantitative easing is actually the answer to the problems,” said David Buik, a market strategist at Cantor Index Ltd. in London. “Still, QE has underwritten the value of equities over the past three years, so that is why I think it is a bold move to consider ending stimulus.”

The Federal Open Market Committee minutes, released yesterday in Washington, showed a split on how long the bond purchases should last. Participants who provided estimates were “approximately evenly divided” between those who said it would be appropriate to end the purchases around mid-2013 and those in favor of continuing beyond that time.

Jobs Data

The U.S. Labor Department will release its non-farm payrolls report for December at 8:30 a.m. in Washington. The median forecast of economists in a Bloomberg survey projects a gain of 153,000 workers, following an increase of 146,000 in November. The unemployment rate held at 7.7 percent, the lowest since December 2008, according to economists’ estimates.

Fresnillo slid 5.6 percent to 1,779 pence after UBS downgraded the shares to neutral from buy, citing recent gains in the stock which mean it has outperformed silver and its peers. The price of the metal today fell to its lowest since August.

Randgold Resources, a gold wwwucer in West Africa, lost 3.3 percent to 6,025 pence as the price of metal dropped. A gauge of commodity-company shares fell 1.6 percent, for the worst performance of the 19 industry groups on the Stoxx 600.

Marks & Spencer

Marks & Spencer Group Plc (MKS), the U.K.’s biggest clothing retailer, dropped 3 percent to 376.7 pence. Nomura Holdings Inc. lowered its 2013 pre-tax estimates for the retailer to 666 million pounds ($1.07 billion) from 694 million pounds, citing a fall in general merchandise sales.

Arkema SA (AKE), the French maker of industrial chemicals, slid 2.8 percent to 81.60 euros as chemical shares declined.

Merck KGaA (MRK), the German maker of cancer drug Erbitux, fell 1.6 percent to 99.93 euros. The stock was downgraded to neutral from buy at Nomura Holdings.

Getinge AB, the world’s largest maker of sterilization systems, declined 2.6 percent to 219.2 kronor after Bank of America Corp. downgraded the stock to neutral from buy, citing limited future gains for the shares and uncertainty in the U.S.

Sonova Holding advanced 2.1 percent to 106.90 Swiss francs after Bank of America’s Merrill Lynch unit upgraded the stock to buy from neutral.

Fiat Gains

Fiat added 1.6 percent to 4.01 euros. The Italian carmaker said after the close of trading yesterday that it exercised an option to buy a 3.3 percent stake in Chrysler Corp. for $198 million, bringing its total stake to 65.2 percent.

Sky Deutschland AG (SKYD), the German pay-TV provider half-owned by Rupert Murdoch’s News Corp., rose 2.3 percent to 4.46 euros after it reached agreement with Deutsche Telekom AG to offer Sky on its Entertain digital TV system.

Bankia SA, the lender that received the biggest Spanish bailout, surged 14 percent to 47.2 euro cents, leading gains on the Stoxx 600.

ThromboGenics NV jumped 6.6 percent to 45.75 euros, its highest intra-day price since at least July 2006, after it confirmed its U.S. launch date of Jan. 14 for its Jetrea vision restoration treatment.