European stocks drop on disappointing eurozone data


Posted by Imaduddin

LONDON: European equities slid on Tuesday as news of a sharp slowdown in eurozone business activity stoked fears over the timid economic recovery.

London’s biggest fallers were drugmakers Shire and AstraZeneca — both targeted by US takeovers this year — as Washington acted to curb so-called tax-inversion deals that sap government income.

Elsewhere, shoemaker to the stars Jimmy Choo unveiled plans for a London stock market float valuing it at up to £800 million ($1.3 billion, 1.0 billion euros) to fund expansion in Asia.

Amid the batch of company announcements, the British capital’s benchmark FTSE 100 index was down 1.27 percent to 6,687.31 points in midday deals.

Frankfurt’s DAX 30 index sank 1.10 percent to 9,641.81 and the Paris CAC 40 shed 1.63 percent to 4,369.73, compared with Monday’s closing level.

“European and Asian markets are continuing the negative start to the week, posting further losses following a raft of poor eurozone PMI releases,” said analyst Joshua Mahony at traders Alpari.

Business activity in the 18-nation eurozone slowed further in September, a key survey showed Tuesday, adding to concerns that a sluggish economic recovery could be close to stalling.

Markit Economics said its Composite Purchasing Managers Output Index (PMI) fell for a second consecutive month, hitting a nine-month low of 52.3 points in September from 52.5 points in August.

“The latest PMI data are testimony to the lacklustre nature of the eurozone’s economic recovery,” added ING analyst Martin van Vliet.

The news offset the impact of better-than-expected Chinese manufacturing PMI data.

Back in London, Shire and AstraZeneca saw their share prices plunge after the US Treasury took action to halt a rising torrent of US companies moving offshore to cut their tax bills.

In July, Shire had accepted a £32-billion takeover bid from US peer AbbVie.

But in May, AstraZeneca successfully fought off a $117-billion takeover bid from US giant Pfizer.

Both blockbuster takeovers had proposed to switch their tax base away from the United States to minimise their liablities.

In midday deals, AstraZeneca shares dived 5.04 percent to 4,347 pence and Shire plunged 6.06 percent to 4,913 pence.

“The US is acting to stop the tax-inversion takeover deals that have proved so popular in recent months,” said TrustNet analyst Tony Cross.

“As a result we’ve seen AstraZeneca fall 5.0 percent … whilst Shire Pharmaceuticals is off 6.0 percent as concern builds that the AbbVie tie up could now fall apart.”

Elsewhere, troubled supermarket giant Tesco saw its shares slide 3.68 percent to 195.53 pence as industry data showed the group losing valuable market share in home market Britain.

The news came one day after Tesco admitted massively overestimating its profits, in dire news which sent shares slumping nearly 12 percent on Monday.

The nation’s biggest retailer added Tuesday that new financial chief Alan Stewart will join with immediate effect, rather than on December 1 as previously announced.

Barclays meanwhile slid 1.33 percent to 228.65 pence after the British bank was fined almost £38 million for putting client assets at risk, dealing a further blow to the troubled lender.

In London currency trade, the euro firmed to $1.2883, up from $1.2849 late in New York on Monday, when it had hit a 14-month low of $1.2813.

The single currency rose to 78.78 pence from 78.53 pence late in New York on Monday, while the pound eased to $1.6352 from $1.6361.

The price of gold climbed to $1,225.45 per ounce, up from $1,213.50 on Monday on the London Bullion Market.



Please enter your comment!
Please enter your name here