European Stocks Drop Most in Two Weeks on Adidas Forecast

By Jonathan Morgan

European stocks declined the most in two weeks as Adidas AG lowered its profit forecast, outweighing better-than-expected earnings at energy companies Royal Dutch Shell Plc (RDSA) and BG Group Plc. U.S. stock-index futures and Asian shares also dropped.
Adidas AG slumped the most since 2008 as the world’s second-biggest sporting-goods maker said the crisis in Ukraine will reduce its profit from Russia. Afren Plc tumbled 32 percent after suspending senior managers following an investigation into unauthorized payments. Shell advanced 3 percent after beating estimates partly because of higher prices. BG gained 1.7 percent as it increased production in Brazil.
The Stoxx Europe 600 Index decreased 0.9 percent to 337.38 at 10:17 a.m. in London, extending its decline in July to 1.3 percent. The benchmark has posted its first back-to-back monthly losses in more than two years. Standard & Poor’s 500 Index futures slipped 0.7 percent today, while the MSCI Asia Pacific Index retreated 0.4 percent.

“It’s all about earnings today,” Herbert Perus, who helps oversee $36 billion as head of equities at Raiffeisen Capital Management in Vienna, said in a phone interview. “If you look at Adidas, very disappointing. If you look at Royal Dutch, good numbers. It is a very interesting day.”
Adidas sank 12 percent to 61.66 euros after forecasting net income of 650 million euros ($871 million) in 2014. The owner of the Adidas and Reebok brands had estimated profit of 830 million euros to 930 million euros. The German sportswear company said the conflict between separatists and the Ukrainian government poses increasing risks to spending on its products in Russia and neighboring countries.

EU Sanctions

The European Union froze the assets of two Russian oligarchs last night as part of a broader range of measures to make President Vladimir Putin withdraw his support from rebels in eastern Ukraine. The 28-nation club has toughened its measures against the Kremlin after Malaysian Air Flight 17 was shot down on July 17. The U.S. says the missile was fired from an area controlled by pro-Russian separatists.
Afren slumped 32 percent to 101 pence. The U.K. explorer of oil in Africa and northern Iraq suspended Chief Executive Officer Osman Shahenshah and Chief Operating Officer Shahid Ullah after an independent review found evidence of unauthorized payments to both managers. The investigation didn’t find evidence that other board members were involved, the company said in a statement.
Alcatel-Lucent SA plunged 8.8 percent to 2.59 euros. The French network-equipment maker reported sales of 3.28 billion euros in the second quarter, less than the 3.3 billion-euro average estimate of analysts surveyed by Bloomberg.

Balfour Beatty

Balfour Beatty Plc slid 6.6 percent to 236.1 pence. The U.K. construction company ended talks to merge with rival British builder Carillion Plc after refusing to include its New York-based infrastructure consulting business in the deal. Carillion retreated 4 percent to 339 pence.
Banco Espirito Santo SA tumbled 42 percent to 20 euro cents.
Shell advanced 3 percent to 2,454.5 pence. Europe’s biggest oil company reported profit, excluding one-off items and inventory changes, that climbed 33 percent to $6.1 billion from $4.6 billion a year earlier. That beat the $5.6 billion average estimate of analysts surveyed by Bloomberg.
In Germany, a Federal Labor Agency report showed that unemployment stayed at 6.7 percent in July, matching the median estimate of economists surveyed by Bloomberg News.