European Stocks Retreat as Ukraine Tension Escalates With Crash

Jul 17, 2014 12:22 pm ET

July 17 (Bloomberg) -- Stocks in Europe fell the most in a week, extending losses in the last 30 minutes of trading after a report that a Malaysian passenger jet crashed in Ukraine, as the European Union and the U.S. imposed further sanctions on Russia.

Novartis AG lost 1.7 percent after posting quarterly profit that missed projections. Sandvik AB retreated 4.1 percent after earnings fell short of estimates. ITV Plc rallied 6.2 percent after Liberty Global Plc bought a minority stake in the U.K. commercial broadcaster. SAP SE rose 2.4 percent after the largest maker of business-management software posted revenue that beat estimates.

The Stoxx Europe 600 Index dropped 0.9 percent to 339.74 at the close of trading in London. The benchmark gauge has fallen 0.6 percent this month as investors weighed the capital strength of Portuguese banks and considered valuations near their highest levels since 2009.

Ukrainian rebels shot down a Malaysian jet carrying 295 people over eastern Ukraine near its border with Russia, a Ukrainian Interior Ministry official said. The Boeing 777 flight between Amsterdam and Kuala Lumpur was hit by a missile and went down near the eastern town of Torez, Ukrainian Interior Minister adviser Anton Gerashchenko said on his Facebook page. The plane was carrying 280 people and 15 crew, he said.

The U.S. and EU imposed the most aggressive sanctions to date on Russian businesses and said more may follow, acting after weeks of threats to squeeze Russia’s $2 trillion economy over the confrontation in Ukraine.

Russian Sanctions

The Obama administration’s targets include OAO Rosneft, Russia’s largest oil company, natural gas producer OAO Novatek, OAO Gazprombank, the country’s third-largest lender, and eight defense firms, among them the maker of the Kalashnikov assault rifle. EU leaders meeting in Brussels agreed to blacklist companies and halt lending to public-sector projects in Russia.

National benchmark indexes fell in all 18 western-European markets except Greece and Iceland. France’s CAC 40 dropped 1.2 percent, Germany’s DAX slipped 1.1 percent and the U.K.’s FTSE 100 lost 0.7 percent.

Novartis retreated 1.7 percent to 79.75 Swiss francs. The world’s largest drugmaker by sales said earnings excluding some items increased 3 percent to $3.28 billion, or $1.34 a share. That missed the average analyst forecast of $1.37 a share.

Sandvik slipped 4.1 percent to 88.75 kronor. The world’s biggest maker of metal-cutting tools posted second-quarter operating profit of 2.56 billion kronor ($375 million) as weaker market conditions in Russia and the southern hemisphere offset favorable developments in western Europe. That compared with the average analyst projection of 2.69 billion kronor.

Espirito Santo

Banco Espirito Santo SA plunged 7.9 percent to 41.9 euro cents. S&P cut its rating to B- from B and kept its outlook negative, citing its exposure to the financial problems of Espirito Santo Financial Group SA, which owns 20 percent of the lender. Two related companies have missed debt payments in the last week and a half.

Telecom Italia SpA slid 4.1 percent to 87.2 euro cents. Telefonica SA will cut its stake in Telecom Italia by more than a third following the 750 million-euro ($1 billion) sale of convertible bonds. The three-year bonds will be exchangeable for as much as 6.5 percent of Telecom Italia’s shares, the Madrid- based carrier said.

SGS SA lost 2.9 percent to 2,074 Swiss francs. The world’s largest product-inspection company reported lower first-half earnings as the mining-services market deteriorated and the strength of the franc reduced the value of sales from abroad.

Nordea Earnings

Nordea Bank AB slipped 3.4 percent to 92.70 kronor. The Nordic region’s largest bank said second-quarter net income fell to 686 million euros from 772 million euros a year earlier.

ITV rallied 6.2 percent to 195.1 pence, its biggest gain in almost a year. Liberty Global said it acquired a 6.4 percent stake in ITV from British Sky Broadcasting Group Plc. Cable billionaire John Malone’s company said it doesn’t plan to make a full takeover offer. Liberty Global paid 185 pence a share, BSkyB said. ITV closed at 183.8 pence yesterday.

SAP added 2.4 percent to 59.37 euros. Sales of software and related services rose 4 percent to 3.48 billion euros. Operating profit excluding some items climbed 4 percent to 1.24 billion euros. Analysts had predicted 3.45 billion euros in revenue and operating profit of 1.26 billion euros, according to data compiled by Bloomberg.

Fiat SpA rose 1.4 percent to 7.71 euros after Germany’s Manager Magazin reported that discussions had taken place on a potential takeover of the Italian company by Volkswagen AG.

A Volkswagen official said takeovers aren’t on the agenda at the moment. Both Fiat and its biggest investor denied the report that Europe’s largest carmaker made an approach to buy all or part of the Italian competitor. Preferred shares of Volkswagen fell 2.2 percent to 185 euros.