European Stocks Fall to Two-Week Low Before Fed Meeting

By Namitha Jagadeesh

European stocks fell to a two-week low amid speculation about the timing of a U.S interest-rate increase before a two-day Federal Reserve meeting, and this week’s vote on Scottish independence. U.S. stock futures were little changed, while Asian shares fell.
The Stoxx Europe 600 Index retreated 0.7 percent to 341.55 at 11:32 a.m. in London, extending earlier losses. The equity gauge has fallen 2.1 percent since reaching a two-month high on Sept. 4 amid investor concern over the Scottish referendum and central-bank stimulus policies. Standard & Poor’s 500 Index futures lost 0.2 percent today, and the MSCI Asia Pacific Index fell 0.5 percent.
“Investors are a bit more cautious on
European equities after the slowdown in growth over the summer,” said Espen Furnes, who helps oversee about $85 billion at Storebrand Asset Management in Oslo. “No doubt the Scottish referendum especially is a source of uncertainty. The risk of a more hawkish Fed could also dampen investors’ appetite for stocks.”
U.K. stocks fell 0.7 percent today. The FTSE 100 Index has lost 1.8 percent since reaching a three-and-a-half month high on Sept. 4, after a YouGov Plc poll for the Sunday Times showed a majority of voters in Scotland in favor of breaking from the U.K. Subsequent polls showed the vote too close to call. A measure of volatility expectations on the benchmark equity gauge rose 9.5 percent to 16.8 today.
Fed officials will maintain interest rates at a record low at their policy meeting that begins today, according to economists in a Bloomberg survey. Chair Janet Yellen holds a press conference tomorrow.

Fed Assesses

The Fed is assessing the strength of the world’s biggest economy as it winds down a bond-buying program and considers raising rates. The central bank has said that its benchmark rate will stay low for a considerable time after it completes the bond-purchase program.
Air France-KLM Group lost 3.8 percent to 7.96 euros. Chief Executive Officer Frederic Gagey said on Europe1 that a pilot strike costing 10 million euros to 15 million euros a day has cut the carrier’s chances of breaking even on an operating-profit basis in 2014.
Asos Plc (ASC) tumbled 10 percent to 2,179 pence. The U.K.’s largest online-only fashion retailer said investments in logistics, technology and pricing will weigh on annual earnings, which will remain around the same as last year. Analysts had forecast a 37 percent increase to 63.4 million pounds ($103 million) in fiscal 2015, according to estimates compiled by Bloomberg. Asos said it lost sales of 25 million pounds to 30 million pounds in the quarter through August because of a fire at a distribution center.

Debt Refinancing

Petropavlovsk Plc slid 10 percent to 36 pence in London. Russia’s third-biggest gold producer said it is in talks with existing investors to sell new shares to refinance $311 million of convertible bonds maturing early next year. The company said its biggest lenders, OAO Sberbank and VTB Group, are willing to relax some financial covenants on their loans.
United Internet AG dropped 7 percent to 32.27 euros. The internet-service provider sold 11 million new shares to institutional investors for 32 euros apiece.
Thomas Cook Group Plc (TCG) slipped 6.5 percent to 121.6 pence after forecasting full-year underlying earnings before interest and taxes of 315 million pounds to 335 million pounds. The shares may continue to perform poorly relative to peers as the consensus estimate is for 334 million pounds, Numis Securities Ltd. said in a note.
Jazztel Plc climbed 5.7 percent to 12.73 euros and Orange SA declined 1.7 percent to 11.26 euros as the French company offered to buy the Spanish broadband provider for about 3.4 billion euros ($4.4 billion). Orange has bid 13 euros for each Jazztel share, or 22 percent more than the stock’s Sept. 12 close in Madrid, the companies said yesterday.