European Markets Drop After German Factory Orders Disappoint

Lucy Stoeva
05 Apr, 2016
New York City

European market indexes fell between 1% and 2.5% after factory orders in Germany unexpectedly dropped. Peugeot SA plummeted 6.5% after its new five-year strategic plan disappointed investors. Vale agreed to sell its stake in a steel plant venture with ThyssenKrupp and focus on core mining business.

[R]4:00 PM Frankfurt, Germany - European market indexes fell between 1% and 2.5% after factory orders in Germany unexpectedly dropped. Peugeot SA plummeted 6.5% after its new five-year strategic plan disappointed investors. Vale agreed to sell its stake in a steel plant venture with ThyssenKrupp and focus on core mining business.[/R]

European stocks broadly declined on Tuesday after factory orders in Germany unexpectedly dropped on falling foreign demand, especially from the euro area.

New manufacturing orders, seasonally adjusted, fell 1.2% in February from the previous month, according to Destatis. Economists were looking for orders to increase 0.4%.

While domestic orders grew 0.9%, foreign demand slipped 2.7%. Orders from the euro area dropped 3.7%.

Separately, the final reading of Markit’s March Composite PMI declined to 53.1 from a flash reading of 53.7.

The downward growth revision was largely due to the recent weakness in the French and Italian economies, Markit said.

Nevertheless, the reading indicates growth from the 53 points reported in February and is above the key 50-point benchmark, which separates growth from contraction.

Adding to the gloomy sentiment, Christine Lagarde, the IMF managing director, warned of increasing risks to global growth in a speech at Frankfurt’s Goethe University.

Banking stocks were among the major losers on weakness of Italian lenders and media reports that Société Générale, along with HSBC, UBS and Credit Suisse, created the largest number of offshore companies through Mossak Fonseca.

Société Générale tumbled 4.3%, HSBC was down 3.1%, and Credit Suisse plummeted 5.1%.

The euro gained 0.05% against the dollar to $1.1397.

Brent crude oil futures added 0.32% to $37.81 per barrel and WTI crude oil futures climbed 0.20% to $35.77 per barrel.

In London, the FTSE 100 fell 67.38, or 1.09% 6,097.34, while in Frankfurt, the DAX index tumbled 252.22, or 2.57%, to 9,569.86

In Paris, the CAC 40 index lost 86.95, or 2.00%, to 4,258.27.

Peugeot SA plummeted 6.5% to €13.72 after its new five-year strategic plan disappointed investors. The French car maker presented a plan to revive consistent sales growth, but projected slightly lower margins.

It expects revenues to increase 10% in 2018 from 2015 through the launch of new products, including plug-in hybrids, electric vehicles and a pickup truck.

In terms of production costs, Peugeot targets saving €700 per vehicle, compared with €211 per vehicle achieved in 2015.

The company expects an average operating profit margin of 4% for the automotive division over the next three years, compared with 5% in 2015.

Peugeot also said it would launch a car-sharing service in the U.S. by 2017 as a first step towards returning across the Atlantic. The car maker withdrew from the U.S. market 25 years ago due to poor sales and tough competition.

Société Générale SA erased 4.3% to €31.08 on reports that the French bank is among the companies that created the largest number of offshore companies through the Panama law firm Mossak Fonseca.

In total, SG accounts for 979 companies, behind HSBC with 2,300 companies, UBS and Credit Suisse with about 1,100 companies each, according to the French daily Le Monde.

The newspaper reported that while the creation of offshore companies has slowed significantly since 2012, around 100 entities opened by Société Générale at Mossack still remain active.

On Monday, Société Générale said that since 2012, it no longer held, directly or indirectly, any establishments in operation in the Non-Cooperative Countries and Territories.

The bank claims that the recent media allegations refer to structures held by clients.

ThyssenKrupp AG fell 4.7% to €18.16 after the Brazilian mining company Vale SA said it would sell its 27% stake in Companhia Siderurgica do Atlântico to ThyssenKrupp for an undisclosed amount.