Monday, June 22, 2009

European Stocks, U.S. Futures Down, Asian Shares Rise

. Monday, June 22, 2009

By stockOzone team

European stocks fell for the first time in three days as the World Bank said the global recession will be deeper than it predicted in March. Asian shares gained, while U.S. index futures dropped.

Royal Dutch Shell Group Plc and Total SA declined at least 1 percent as oil traded below $70 a barrel on speculation weak demand will increase U.S. gasoline stockpiles. Anglo American Plc rallied more than 9 percent after Xstrata Plc proposed a “merger of equals” with the London-based mining company.

Europe’s Dow Jones Stoxx 600 Index lost 1.1 percent to 205.90 at 9:31 a.m. in London, as all 19 industry groups fell. The gauge last week posted the first weekly drop since May 15 on speculation share prices had outpaced the outlook for economic growth after a three-month rally sent valuations up to 25.4 times earnings, the highest level since 2004, according to weekly data compiled by Bloomberg.

The World Bank forecast the global economy will contract 2.9 percent this year in a report today. That compares with a prior estimate of a 1.7 percent decline. Growth is expected to return next year with a 2 percent expansion, lower than the 2.3 percent prediction about three months ago.

The report “has probably led to some early weakness in the market, but leading indicators generally are showing signs of improvement and the numbers are getting less bad every month,” said Kevin Lilley, a London-based fund manager at Royal London Asset Management, which oversees about $63 billion. “There is also a reluctance to climb onboard the bullish trade at this time of year.”

Ifo, ECB
In Germany, the Ifo institute’s business confidence index rose for a third month in June after the measure reached a 26- year low in March. U.K. home sellers lowered asking prices in June for the first time in five months as banks scaled back lending, according to a report by Rightmove Plc.

European Central Bank Governing Council member Ewald Nowotny said the bank is likely to keep interest rates steady for at least the rest of the year. The ECB won’t substantially alter its assessment of the economic outlook and “therefore I also don’t see a likelihood for rate changes,” Nowotny, who heads Austria’s central bank, said in an interview in Vienna on June 19.

The MSCI Asia Pacific Index gained 0.6 percent today, led by automakers and financial companies. Sentiment among large Japanese manufacturers increased to minus 13.2 points compared with a record low of minus 66 three months ago, a government survey showed. Futures on the Standard & Poor’s 500 Index slipped 0.8 percent.

Crude Oil
Shell, Europe’s largest oil company, dropped 2.3 percent to 1,555 pence as crude for July delivery fell as much as 0.7 percent to $69.05 in New York. Total slipped 1.3 percent to 38.68 euros, while StatoilHydro ASA, Norway’s biggest oil and natural-gas producer, declined 2.1 percent to 132.5 kroner.

Xstrata, the world’s fourth-largest copper producer, fell 1.8 percent to 669 pence, while Anglo American surged 9.2 percent to 1,773 pence. The Swiss mining company yesterday proposed a merger with Anglo American that it said would lead to “substantial” cost savings.

The combined company would have sales of more than $54 billion, based on 2008 figures, and produce commodities including copper, coal, iron ore and zinc.

Separately, copper in London and New York slumped to the lowest in more than two weeks on concern that China, the world’s largest user, may buy less and as gains by the dollar damped demand for commodities.

Porsche, Renault
Porsche SE fell 3.5 percent to 42.45 euros as the Financial Times said the carmaker may have its request for a 1.75 billion- euro ($2.4 billion) state loan rejected by the German government. The newspaper cited a senior government official.

Separately, Bild am Sonntag reported Daimler may be interested in acquiring a stake in Porsche, without saying where it got the information. Daimler and Porsche earlier dismissed a report in Manager Magazin about potential talks over a Daimler investment as “speculation.”

Renault SA retreated 2.6 percent to 26.32 euros, extending last week’s 11 percent drop. France’s second-largest carmaker had its long-term corporate credit and debt ratings cut to the speculative-grade level of BB from BBB- by Standard & Poor’s.

Brixton Plc slumped 32 percent to 42.5 pence after the company agreed to the terms of a possible offer from Segro Plc that would value Brixton at about 107 million pounds ($176 million). Brixton’s current market value is about 115 million pounds, according to Bloomberg data. Segro decreased 3.3 percent to 21.75 pence as it plans to finance the offer by raising as much as 250 million pounds in a share sale.

Alcatel-Lucent SA dropped 5.1 percent to 1.84 euros after the world’s largest maker of fixed-line networks was downgraded to “underperform” from “neutral” at Bank of America Corp.

Disclosure: Author does not own any of the stocks discussed here.

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