Bloomberg News

European Stocks Retreat on Economy; Monte Paschi, KBC Decline

June 01, 2011

June 1 (Bloomberg) -- European stocks declined the most in a week after U.S. employment and manufacturing data trailed economists’ forecasts and China’s factory production expanded at the slowest pace in nine months.

Banca Monte dei Paschi SpA sank the most in two years as the Italian lender’s controlling shareholder sold 450 million shares. KBC Groep NV lost 6.2 percent after a report the Belgian bank is considering a 2 billion-euro ($2.9 billion) share sale. BG Group Plc and Repsol YPF SA led a retreat in energy stocks as crude oil declined in New York.

The Stoxx Europe 600 Index fell 1 percent to 278.38 at the 4:30 p.m. close in London. The benchmark declined 1 percent last month amid speculation that Greece will be forced to restructure its debt. Since reaching this year’s high on Feb. 17, the gauge has retreated 4.4 percent.

“A lot of factors are arguing for a correction,” said Chicuong Dang, an analyst at KBL Richelieu in Paris. “Economic statistics in general aren’t improving. There isn’t a reason to be overly enthusiastic.”

National benchmark indexes fell in 16 of the 18 western European markets. The U.K.’s FTSE 100 lost 1 percent, while Germany’s DAX fell and France’s CAC 40 each slid 1.1 percent.

U.S. companies added 38,000 workers in May, according to figures from ADP Employer Services. The median estimate in a Bloomberg News survey of economists called for a 175,000 advance. The disappointing data come two days before the Labor Department’s monthly payrolls report.

U.S. Manufacturing

Separate figures showed manufacturing in the world’s largest economy grew at the slowest pace in more than a year in May. The Institute for Supply Management’s factory index fell more than projected to 53.5, the lowest level since September 2009, from 60.4 in April. The median economist forecast was for a drop to 57.1.

China’s manufacturing growth eased in May as the government extended a campaign to cool inflation and the property market. The Purchasing Managers’ Index dropped to 52 from 52.9 in April, the China Federation of Logistics and Purchasing said.

A gauge of manufacturing in the 17-nation euro area slipped to 54.6 in May from 58 in April, London-based Markit Economics said today. That fell short of the initial estimate of 54.8 released on May 23. A reading of more than 50 indicates growth.

Monte Paschi slumped 7.6 percent to 81.05 euro cents, the biggest drop since March 2009. Goldman Sachs Group Inc. sold 450 million shares on behalf of Fondazione Monte dei Paschi di Siena, a term sheet for the deal showed.

KBC Drops

KBC Groep lost 6.2 percent to 27.56 euros after De Tijd newspaper reported the bank, which received 7 billion euros in Belgian government rescue funds, is considering raising about 2 billion euros in a share sale. KBC said it is “pro-actively examining” changes to the strategic plan agreed with the European Union as a condition of the aid.

BG Group lost 3.1 percent to 1,363 pence, Repsol slid 2.2 percent to 23.16 euros and Total SA declined 1.1 percent to 39.58 euros. Crude fell for the first time in three days as the U.S. jobs and manufacturing data added to concern that growth in the world’s largest economy will slow.

De La Rue Plc, a supplier of cash-handling equipment and security products, slid 2.9 percent to 798 pence as Oberthur Technologies said it has no intention of making another offer for the banknote printer.

Tate & Lyle Climbs

Tate & Lyle Plc soared 5 percent to 651.5 pence amid speculation that Bunge Ltd. may bid for the maker of Splenda sweetener and after Deutsche Bank AG analysts raised their forecast for the stock.

Bunge, the world’s second-largest sugar trader, is “the main credible suitor” for Tate, according to analysts at Exane BNP Paribas. A Tate & Lyle spokesman declined to comment on any possible bid for the company. A call and e-mail to a spokesman for Bunge were not immediately returned.

Outokumpu Oyj surged 3.8 percent to 10.63 euros after the Finnish steel maker sold a 4.3 percent stake in Talvivaara Mining Co. to Solidium Oy, which manages the shareholdings of the Finnish state.

Axa SA gained 1.5 percent to 15.06 euros after Canada’s Intact Financial said it will buy Axa’s Canadian business to increase its premiums in the country by almost 50 percent. The French insurer also said it’s seeking average annual growth in underlying earnings per share of 10 percent to 2015.

--With assistance from Francine Lacqua and Sarah Jones in London. Editors: Andrew Rummer, Will Hadfield

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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