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European Stocks Decline, Paced by UBS, E.ON; Volvo, SKF Slide
European stocks fell for a fourth day, the longest losing streak in three months, after the U.S. 10-year bond yield rose above 5 percent, deepening concern central banks are poised to raise interest rates.
UBS AG, the region's biggest bank by assets, utility E.ON AG and insurer Axa SA paced declines by companies most sensitive to higher rates. Volvo AB and SKF AB led industrial companies lower after brokerages downgraded the stocks.
People are fearful of higher interest rates,'' said Jeremy Le Sueur, who helps manage $265 million at Church House Investments in Somerset, England. ``Bonds are becoming more attractive.''
The last time Europe's Dow Jones Stoxx 600 Index fell for four consecutive days was the first week of March. The measure slid the most in two months yesterday on speculation the European Central Bank will keep raising borrowing costs. New Zealand unexpectedly increased its key rate today to curb inflation.
The Stoxx 600 last week reached its highest since September 2000, climbing within 6 points of a record set in March 2000. The index declined 1.2 percent to 385.52 today. The Stoxx 50 slid 0.9 percent, while the Euro Stoxx 50, a measure for the 13 nations sharing the euro, lost 1.3 percent.
National benchmarks fell in all of the 17 western European markets that were open. France's CAC 40 dropped 1.5 percent, and Germany's DAX sank 1.4 percent. The U.K.'s FTSE 100 slid 0.3 percent.
Indexes extended declines on reports North Korea test fired several short-range missiles into the Yellow Sea.
Banks, Insurers Fall
UBS dropped 2 percent to 75.3 Swiss francs. E.ON, Germany's largest utility, retreated 1.8 percent to 114.3 euros, and Axa, Europe's second-biggest insurer, lost 1.4 percent to 31.42 euros.
Higher bond yields reduce the value of debt owned by banks and insurers, and make dividends that utilities pay, among Europe's highest, less attractive relative to payments from bonds.
Benchmark U.S. 10-year note yields rose above 5 percent for the first time since August, adding more than 7 basis points to 5.04 percent, according to bond broker Cantor Fitzgerald LP. In Europe, 10-year bund yields reached 4.52 percent, the highest since December 2002.
Volvo, the region's second-largest truckmaker, decreased 4.6 percent to 141.5 kronor. JPMorgan Chase & Co. cut its recommendation on the stock to ``underweight'' from ``neutral.'' Production will probably fall ``significantly'' in the second quarter, hurting profit margins, London-based analyst Julia Varesko wrote in a note to investors.
SKF, BAE
SKF, a Swedish maker of ball bearings, fell 5.1 percent to 140 kronor. London-based analyst Gustaf Lindskog at Morgan Stanley reiterated his ``underweight'' recommendation, citing a ``short-term trading opportunity'' in switching to Sandvik AB shares.
The Dow Jones Stoxx 600 Industrial Goods and Services Index slid 1.6 percent, bringing its loss in the past three days to 4 percent.
BAE Systems Plc, Europe's biggest weapons maker, fell 2.3 percent to 428.25 pence. The company denied a report in the U.K.'s Guardian newspaper that it made secret payments in excess of 1 billion pounds ($2 billion) to a Saudi prince.
Prince Bandar bin Sultan, who was Saudi ambassador to the U.S. for 20 years, received quarterly payments of 30 million pounds over at least 10 years in connection with the Al-Yamamah arms deal, the Guardian reported. Representatives of the prince couldn't immediately be contacted for comment.
Vodafone Group Plc jumped 2.1 percent to 158.4 pence after an activist investment group said the phone company should return as much as 38 billion pounds ($76 billion) to investors by spinning off its Verizon Wireless stake and issuing bonds.
`Plenty of Value'
Vodafone spokesman Mark Pursey declined to comment on the proposals.
``It's about time the company got moving,'' said Robin Griffiths, head of asset allocation at Rathbone Unit Trust in London, which oversees the equivalent of $19.8 billion. ``Either management does this itself or someone else will do it. There is plenty of value in the stock to be extracted.''
Royal Ahold NV added 7.3 percent to 9.73 euros. The Dutch owner of U.S. supermarket chains Stop & Shop and Giant said first- quarter profit fell 2 percent to 241 million euros ($326 million) after it cut prices and renovated outlets to keep U.S. shoppers from defecting to Wal-Mart Stores Inc. That beat the 228 million- euro median estimate of 13 analysts surveyed by Bloomberg News.
Rhodia SA, France's largest maker of specialty chemicals, dropped 6.5 percent to 2.75 euros. The company said it has no information to explain why the shares fell almost 15 percent earlier today and has asked the stock market regulator to look into the matter.
ASML, Meda
ASML Holding NV, Europe's largest maker of semiconductor equipment, climbed 1.7 percent to 18.94 euros after Sanford C Bernstein Co. raised its recommendation on the shares to ``outperform'' from ``market perform.''
Meda AB, a Swedish drugmaker, dropped 8.8 percent to 109 kronor after Chief Executive Officer Anders Loenner sold 20 percent of his shares, sparking speculation he may leave the company.
``It's a negative signal when the CEO sells 20-25 percent of his shares,'' Erik Hultgard, analyst at Kaupthing, said today in a telephone interview from Stockholm. ``If he were to leave, it would be a big loss for Meda.''
Loenner said in a telephone interview any speculation that he was leaving the company ``was absolutely not true.''
Brisa Auto-Estradas de Portugal SA, the nation's biggest highway company, rallied 3.4 percent to 10.04 euros after Babcock & Brown Ltd., Australia's second-largest investment bank, bought 10 percent of the company for 590 million euros.
Shares of Sanofi-Aventis SA and France Telecom SA are trading without the right to their latest dividends today.
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