European Stocks Decline as Investors Watch Russia-Ukraine Crisis

Tuesday, 12 Aug 2014 12:07 PM


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European stocks fell, following their biggest rally since April, as Henkel AG declined, while a Russian aid convoy left for Ukraine.

Henkel lost 5.4 percent after warning that earnings growth will slow amid conflicts in Ukraine and the Middle East. Hargreaves Lansdown Plc retreated 3.3 percent after UBS AG recommended selling the shares. Prudential Plc gained 2 percent after reporting better-than-forecast first-half earnings.

The Stoxx Europe 600 Index slipped 0.3 percent to 328.55 at 4:11 p.m. in London. The equity benchmark fell 2.1 percent last week amid crises in Iraq, Ukraine and the Gaza Strip. The measure rallied 1.4 percent yesterday after a report that Russian war planes had finished military exercises near Ukraine. Russia sent 280 trucks toward Southeast Ukraine this morning to deliver humanitarian aid including food, medicine and drinking water, Itar-Tass reported.

“Now the market is watching the news on the humanitarian aid to see if this is something of a Trojan Horse as some people out of Kiev might suspect, or if the Russian intention is really to help the citizens,” Guillermo Hernandez Sampere, who helps manage about 105 million euros ($140 million) at MPPM EK in Eppstein, Germany, said. “It is always quite difficult to judge.”

German Confidence

German investor confidence fell for an eighth month in August as the crisis in Ukraine and a slow euro-area recovery dimmed the outlook for Europe’s largest economy. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, slid to 8.6 from 27.1 in July. Economists had forecast a drop to 17.

National benchmark indexes advanced in 11 of 18 western European markets. The U.K.’s FTSE 100 Index fell 0.2 percent, France’s CAC 40 slid 0.9 percent, and Germany’s DAX dropped 1.2 percent.

Henkel lost 5.4 percent to 78.02 euros. The German maker of Loctite glue and Persil washing detergent said earnings growth will slow in the second half as the conflicts in Ukraine and the Middle East harm business. The company said it will still reach its full-year targets after reporting second-quarter earnings before interest and taxes, excluding one-time items and restructuring costs rose 2.1 percent to 674 million euros. Analysts had predicted for 661 million euros.

Hargreaves Lansdown

Hargreaves Lansdown retreated 3.3 percent to 1,045 pence after UBS started coverage of the shares with a sell rating. The U.K.’s largest retail stockbroker faces challenges in getting the necessary flow of investments from savers over the next three years to support a bullish view of the stock, and has a high valuation relative to its peers, UBS said. Hargreaves Lansdown trades at about 26 times estimated earnings, compared with 14 times for rival Aberdeen Asset Management Plc.

Fugro NV lost 10 percent to 27.26 euros. Natixis downgraded the shares to reduce, similar to a sell recommendation, from neutral, citing first-half impairment charges of 347 million euros, restructuring of some of its operations, and margin pressure at its geotechnical and survey divisions.

Prudential gained 2 percent to 1,366 pence after saying first-half operating profit rose to 1.52 billion pounds. That beat analysts’ estimates of 1.47 billion pounds.

Serco Group Plc added 1.5 percent to 333.7 pence. The outsourcing-services provider forecast that about two thirds of full-year profitability will realized in the second half of the year, after posting a 74 percent decline in first-half pretax profit. Serco also said Aggreko Plc’s Angus Cockburn will take over as chief financial officer at the end of October.

Periphery Banks

National Bank of Greece SA advanced 4 percent to 2.35 euros, and Piraeus Bank SA climbed 3.9 percent to 1.35 euros. In Italy, Banca Popolare di Sondrio Scarl rose 2.8 percent to 3.23 euros, and Banca Monte dei Paschi di Siena SpA added 4.3 percent to 1.07 euros. Commerzbank AG, Germany’s second-biggest lender, climbed 2.1 percent to 10.65 euros. A gauge of banking stocks advanced the most among the 19 industry groups in the Stoxx 600.

“Periphery banks are seen as a high beta play on the European market, so if you see a little bit of a relief in Europe overall you would expect to see a more pronounced effect on those stocks,” Raimund Saxinger, a fund manager at Frankfurt Trust Investment GmbH, which oversees about $22 billion, said in a phone interview.

© Copyright 2014 Bloomberg News. All rights reserved.

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