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European Stocks Drop After Fed Tapers, China Output Slows

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European stocks dropped after the Federal Reserve trimmed bond buying for a second straight meeting and a Chinese manufacturing report indicated the first contraction in six months. Asian shares slid, while U.S. stock-index futures rose.

Roche Holding AG, the world’s biggest maker of cancer drugs, fell 1.8 after posting profit that fell short of analysts’ projections. Diageo Plc lost 4.2 percent after the world’s biggest distiller reported first-half profit growth that missed estimates. Givaudan SA jumped 5.8 percent after posting full-year net income that beat analyst estimates.

The Stoxx Europe 600 Index lost 0.4 percent to 320.98 at 8:22 a.m. in London. Standard & Poor’s 500 Index (SPX) futures gained 0.2 percent, while the MSCI Asia Pacific Index declined 1.6 percent.

“Anyone speculating the Fed would hold off from tapering has been sorely disappointed and frankly they need to listen to the Fed,” Chris Weston, chief market strategist at IG Ltd. in Melbourne, wrote in an e-mail. “China is also another real concern. The bears are getting louder and louder.”

The Stoxx 600 declined 0.6 percent yesterday as the Turkish central bank’s interest-rate increases failed to support emerging-market currencies.

Stimulus Cuts

The Federal Open Market Committee said yesterday it will cut monthly bond purchases by $10 billion to $65 billion, sticking to a plan for a gradual withdrawal from its unprecedented monetary easing. It was the first meeting without a dissent since June 2011. The Fed reiterated that it will probably hold its target interest rate near zero “well past the time” that unemployment falls below 6.5 percent.

A report at 8:30 a.m. New York time may show the U.S. economy expanded at a 3.2 percent annualized rate in the fourth quarter, according to the median forecast of economists in a Bloomberg survey. The projected gain in gross domestic product, the value of all goods and services produced, would follow a 4.1 percent increase, completing the strongest six months in almost two years.

Separate data will probably show that more Americans filed applications for jobless benefits in the week ended Jan. 25 and that pending home sales dropped last month, the estimates show.

In Germany, a report may show that the unemployment rate was at 6.9 percent this month. Euro-area data will probably confirm that consumer confidence was at minus 11.7 in January.

China Manufacturing

A Chinese manufacturing gauge signaled the first contraction since July. A Purchasing Managers’ Index fell to 49.5 this month from 50.5 in December, HSBC Holdings Plc and Markit Economics said in a statement. The reading compared with the median 49.6 estimate in a Bloomberg News survey of 14 economists. A number below 50 indicates contraction.

Roche (ROG) fell 1.8 percent to 234.80 Swiss francs. The company said earnings per share excluding some items were 14.27 francs, below the 14.78-franc average analyst estimates in a Bloomberg survey. Roche said net income last year gained 18 percent to 11.4 billion francs ($12.7 billion).

Diageo lost 4.2 percent to 1,830.5 pence. Earnings before interest and tax excluding some items rose 2.9 percent on a so-called organic basis in the six months through December. That’s less than the median 4.9 percent increase that analysts had estimated.

Hennes & Mauritz AB (HMB), Europe’s second-biggest clothing retailer, dropped 2.7 percent to 279.60 kronor. The company reported fourth-quarter profit of 5.61 billion kronor ($869 million), compared with the average analyst projection of 6 billion kronor.

Santander Falls

Banco Santander SA lost 0.9 percent to 6.33 euros. Spain’s biggest bank said fourth-quarter earnings rose to 1.06 billion euros ($1.44 billion), missing the average analyst projection of 1.2 billion euros. The lender’s bad loans increased to 5.64 percent from 5.43 percent in the previous quarter.

Givaudan (GIVN) climbed 5.8 percent to 1,335 francs. The world’s largest maker of flavors and fragrances said 2013 net income was 490 million francs, exceeding the 464.5 million-franc analyst projection. The company also said it plans to pay out a dividend of 47 francs a share, beating the Bloomberg Dividend Forecast of 42 francs.

Ericsson AB (ERICB) rose 4 percent to 80.50 kronor. The world’s largest maker of wireless networks reported reported fourth-quarter net income of 6.41 billion kronor ($990 million), after a loss a year earlier. Analysts predicted 7.22 billion kronor on average, according to an SME Direkt survey. Sales were about the same at 67 billion kronor, trailing the average estimate of 69.2 billion kronor.

Chief Executive Officer Hans Vestberg told directors he has no plans to step down following reports that he is among candidates to succeed Microsoft Corp.’s Steve Ballmer, according to a person familiar with the matter.

(Source: Bloomberg)