European Stocks Drop on Dollar

European Stocks Drop on Dollar, Led by DaimlerChrysler, Hanson

By Alexis Xydias


Nov. 27 (Bloomberg) -- European stocks dropped for a fourth day, led by DaimlerChrysler AG and Hanson Plc, after the dollar's retreat against the euro and pound raised concern exporters' profits may fall.

``A weakening dollar is a problem for European earnings,'' said Guillaume Duchesne, equity strategist at Fortis Private Banking in Luxembourg, which manages $76 billion. ``The earnings momentum was very strong, and a break in that would be a problem for stocks.''

The Dow Jones Stoxx 600 Index slipped 0.7 percent to a three-week low of 353.46 at 2:10 p.m. in London. Almost five stocks fell for each that rose. The Stoxx 50 also lost 0.7 percent, while the Euro Stoxx 50, a measure for the 12 nations sharing the euro, decreased 0.8 percent.

Bayer AG rose after profit at Germany's largest drug company fell last quarter less than analysts had forecast. RWE AG, Germany's No. 2 utility, jumped on takeover speculation and after Morgan Stanley advised investors to buy the stock.

A slump in the dollar against the euro last week sent the Stoxx 600 to its worst weekly decline since the five days ended Sept. 8. A weaker dollar erodes the value of exports to the U.S., Europe's biggest export market accounting for a fifth of all the region's sales.

Through last week, the Stoxx 600 gained 15 percent in 2006 as companies beat earnings estimates and a record year in takeovers lifted share prices.

National benchmarks retreated in all 18 western European markets today, except for Portugal and Luxembourg. Germany's DAX Index lost 1 percent, the U.K.'s FTSE 100 Index slipped 0.5 percent and France's CAC 40 also fell 0.5 percent.

Daimler, Hanson

The dollar retreated for a fifth day against the euro on speculation the Federal Reserve will reduce interest rates in the first quarter. The U.S. currency slid to $1.3123 euros in London, its lowest since March 2005, from $1.3094 in New York on Nov. 24. It also slipped against the pound and the Swiss franc.

DaimlerChrysler, maker of the Jeep and Dodge cars, fell 2.9 percent to 44.23 euros. The carmaker gets about 45 percent of its sales from the U.S. Bayerische Motoren Werke AG, the biggest luxury carmaker, dropped 2.2 percent to 41.86 euros. The company made a quarter of its sales in North America last year.

Automakers were the worst performers today among 18 industry groups in the Stoxx 600.

Hanson the world's largest supplier of sand and gravel for building, declined 1.7 percent to 728.5 pence. The U.S. is the largest market for the U.K. company.

Nokia Oyj, the world's biggest mobile phone maker, decreased 1.8 percent to 15.71 euros. Espoo-based Nokia gets about eight percent of its revenue from the U.S. Siemens AG, Europe's biggest engineering company, fell 2.4 percent to 72.81 euros. The U.S. is the source of about a fifth of Siemens' revenue.

Bayer, RWE Gain

The dollar's drop ``will lead to analysts adjusting their numbers in the euro zone down for earnings forecasts for the fourth quarter,'' said Gary Dugan, the head of research and investment strategy at Barclays Wealth Management in London, which oversees $100 billion.

Bayer gained 2.3 percent to 39.90 euros. Third-quarter profit fell 35 percent to 320 million euros ($420 million) on the cost of integrating Schering AG, the rival German drugmaker it bought earlier this year. That beat the median estimate of 195 million euros in a Bloomberg survey of nine analysts.

Leverkusen, Germany-based Bayer also raised the forecast for its pharmaceuticals unit.

Record High

RWE rose 3.9 percent to a record 89.95 euros on continued speculation that it may get a takeover bid and after Morgan Stanley said investors should buy the stock because of the company's earnings outlook. RWE stock surged 3.3 percent Nov. 24 after the Rheinische Post reported the company may receive a bid.

``Although no buyer has been named, RWE shares still benefit from takeover speculation,'' said Thomas Nagel, a trader at Equinet Securities AG in Frankfurt. Morgan Stanley recommended the stock as ``overweight.''

BAE Systems Plc dropped 3.8 percent to 388 pence. Europe's largest defense company fell the most in more than five months after the U.K.'s Serious Fraud Office said yesterday a probe into the firm's contracts with Saudi Arabia is ``ongoing.''

MyTravel Group Plc, a U.K. tourism company, gained 6.6 percent to 213 pence after saying it approached First Choice Holidays Plc about buying the company's short-haul package-travel division. First Choice surged 15 percent to 261 pence.

Wilson Bowden Plc jumped 14 percent to 2,081 pence. The U.K. homebuilder said it's in talks with a ``number of parties'' about a possible takeover offer for the company. Negotiations are at an early stage, the company said.

Premier Oil, LVMH

Premier Oil Plc increased 1.5 percent to 1,333 pence. The U.K. company exploring for crude oil in the North Sea, Asia and Africa, rose after reports Kuwait Petroleum Corp. and Oil & Natural Gas Corp. may bid for the company.

India's Oil & Natural Gas may offer to buy Premier to add assets, the Economic Times reported on Nov. 25, citing the company's chairman. Kuwait Petroleum, the Middle East's biggest fuels exporter, may also be interested in Premier, the U.K.'s Sunday Times said yesterday, without saying where it got the information.

Banco Bilbao Vizcaya Argentaria SA fell 3.4 percent to 18.41 euros. Spain's second-biggest bank said it plans to raise 3 billion euros in a stock sale after acquisitions in Asia and the Americas depleted its capital.

LVMH Moet Hennessy Louis Vuitton SA, the world's largest luxury-goods maker, lost 1.8 percent to 80.4 euros. Deutsche Bank AG analysts rated LVMH shares as ``sell'' in new coverage. The German brokerage said a recovery in Japanese consumption has stalled, while slowing growth in the U.S. and China will hurt the company's cognac business.

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net .

Last Updated: November 27, 2006 09:25 EST

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