European Stocks Fall From 2008 High; Sika, Saint-Gobain Plunge

By Inyoung Hwang

A slump in construction companies sent European stocks down after a four-week rally.
The Stoxx Europe 600 Index slid 0.4 percent to 349.75 at 9:34 a.m. in London after a 1.1 percent increase last week propelled it to its highest level since January 2008. Sika AG tumbled 20 percent today and Cie. de Saint-Gobain SA also fell as a hostile bid by Europe’s biggest supplier of building materials sparked a management revolt at the Swiss company. The DAX Index dropped 0.4 percent from a record after a report showed German industrial production climbed less than forecast.
The economy is “ticking along at the bottom. No major drama but no real sign of growth either,” Lex Van Dam, a fund manager at Hampstead Capital LLP in London, said in an interview. “European markets remain underpinned by Draghi put, but it’s worrying that he seems to be losing support within his own monetary committee.”
The Stoxx 600 advanced 13 percent from
this year’s low in October through Dec. 5 on speculation the European Central Bank will start buying government bonds.
President Mario Draghi said last week the ECB will assess the need for more monetary stimulus early next year, strengthening his language on plans to expand the institution’s balance sheet. In a sign of potential strife to come should Draghi want to do more, he said the change in wording was not unanimously supported by the decision-making Governing Council, or even by the six-person Executive Board that he heads and which proposes and implements policies.

Sika Bid

A gauge of construction companies fell 1.6 percent today, the most in a month. Saint-Gobain, down 3.6 percent, offered 2.75 billion Swiss francs ($2.8 billion) to buy a controlling stake in Sika, a maker of construction chemicals. That sparked a battle with management of the Swiss company, which said the deal lacks industrial logic.
“On the micro side, Sika-Saint Gobain is the biggest story,” said Arnaud Scarpaci, who helps oversee $260 million as a fund manager at Montaigne Capital in Paris. “The fact that it’s hostile bid is why both companies are falling.”
Air France-KLM Group decreased 2.7 percent after Europe’s largest airline said cargo traffic dropped in November.
Among companies that advanced, Seadrill Ltd. rallied 5.2 percent after Hemen Holding Ltd. boosted its stake in the the offshore driller. J Sainsbury Plc climbed 0.9 percent after a report that a U.K. activist fund is in discussions with several overseas investors about buying shares in the supermarket chain.