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European Stocks Drop After Fed Minutes; Axa Slides on Net

Published: February 21, 2013 | 8:45 am
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European (SXXP) stocks declined for a second day on concern the U.S. Federal Reserve will scale back its asset-purchase program in the world’s largest economy. Asian shares also fell, while U.S. index futures were little changed.

Axa SA slipped 1.8 percent after Europe’s second-largest insurer reported net income that unexpectedly declined in 2012. Straumann Holding AG lost 3.3 percent as fourth-quarter revenue fell short of analysts’ projections. Swiss Re Ltd. advanced 3.3 percent as the world’s second-biggest reinsurer said it will pay about $2.8 billion in special dividends after lower natural- catastrophe claims last year increased its excess capital.

The Stoxx Europe 600 Index declined 0.5 percent to 287.74 at 8:07 a.m. in London. Futures on the Standard & Poor’s 500 Index added 0.1 percent. The index fell 1.2 percent in New York yesterday, its biggest drop since November, as the minutes of the Federal Open Market Committee’s Jan. 29-30 meeting showed policy makers were divided about Chairman Ben S. Bernanke’s bond-buying program, which is also known as quantitative easing. The MSCI Asia Pacific Index slumped 1.5 percent today.

“The FOMC minutes may have started an adjustment process for the markets, with a bit of realism setting in with investors,” Mark Andersen, co-head of asset allocation at UBS AG in Zurich, said in a telephone interview. “You can’t have both stronger growth and ever expanding balance sheets at central banks. Central-bank members are starting to consider the longer-term consequences as asset prices are really reflating now as planned.”

FOMC Minutes
Fed officials continued to debate whether monetary easing risks unleashing inflation or fueling asset-price bubbles.

Several participants at the FOMC’s meeting “emphasized that the committee should be prepared to vary the pace of asset purchases, either in response to changes in the economic outlook or as its evaluation of the efficacy and costs of such purchases evolved,” according to minutes released after the close of European markets yesterday.

“Whilst some commentators have been arguing that the possible end of quantitative easing is a good indicator that the Fed believes the U.S. economy is able to stand on its own feet, it was clear from the minutes that members were becoming more hawkish due to the possible downside risks of extended asset purchases,” Sudaria wrote.

A report at 10 a.m. in Washington may show that sales of previously owned U.S. houses slowed in January. Purchases fell 0.8 percent to a 4.9 million annualized rate last month from December’s 4.94 million, according to the median forecast of 79 economists surveyed by Bloomberg. A separate release will probably show a measure of the economic outlook climbed.


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