Bloomberg News

European Stocks Retreat After U.S. Job Report; EON, RWE Decline

June 03, 2011

June 3 (Bloomberg) -- European stocks fell, extending the fifth week of declines for the benchmark Stoxx Europe 600 Index, after a U.S. jobs report showed that the world’s largest economy added fewer workers than forecast.

EON AG and RWE AG declined following a report that the utilities will have to lower their sales forecasts. Alpha Bank SA and National Bank of Greece SA advanced more than 7 percent as the head of the group of euro-area finance ministers said that the European Union will pay the next installment of Greece’s aid package.

The Stoxx 600 lost 0.4 percent to 273.67 at the 4:30 p.m. close in London. The gauge had its largest three-day drop since March. The index declined 1.9 percent this week, its fifth straight retreat for the longest losing streak since July 2008. Reports on U.S. employment and manufacturing this week trailed economists’ forecasts and a gauge of Chinese manufacturing expanded at the slowest pace in nine months.

“The second half of the year will show a general weakening of economic activity,” said Martin Huefner, chief economist at Assenagon GmbH in Munich, which manages more than $4.7 billion of client assets. “The market may be terrified after payrolls data, but this is not the end of the upswing. It is a lower uptrend.”

U.S. Payrolls, Jobless

U.S. nonfarm payrolls increased by the smallest number of workers in eight months and unemployment unexpectedly rose to 9.1 percent. Employers added 54,000 workers to payrolls in May. That missed the the median forecast in a Bloomberg News survey for payrolls to climb by 165,000. The jobless rate rose to the highest level this year from 9 percent in April.

Separately, Moody’s Investors Service said yesterday that it will put the U.S. government’s Aaa credit rating under review for a downgrade unless there’s progress on increasing the debt limit by mid-July.

National benchmark indexes fell in 8 of the 17 western European markets trading today. Germany’s DAX Index rose 0.5 percent, while the U.K.’s FTSE 100 Index gained 0.1 percent and France’s CAC 40 Index was little changed.

Greek stocks rallied, with the ASE Index advancing 4.4 percent, after Jean-Claude Juncker, who is also prime minister of Luxembourg, said that EU and International Monetary Fund officials had agreed to pay the next installment of Greece’s 110 billion-euro ($161 billion) bailout. The Mediterranean country’s government earlier said a review of its economic progress with both sets of officials concluded “positively” today.

Alpha Bank SA, Greece’s third-biggest lender, jumped 13 percent to 3.51 euros, while National Bank of Greece SA, the country’s largest lender, surged 7.8 percent to 5.25 euros. EFG Eurobank Ergasias SA rallied 11 percent to 3.42 euros.

EON, RWE Jump

EON and RWE, Germany’s biggest utilities, declined 1.2 percent to 18.84 euros and 2.7 percent to 38.19 euros, respectively. Germany’s four largest electricity companies, EON, RWE, Energie Baden-Wuerttemberg AG and Vattenfall Europe AG will lose about 3.5 billion euros in sales per year from the permanent shut down of 8 out of Germany’s 17 nuclear power plants, Financial Times Deutschland said, citing its own calculations. Moody’s placed EON’s “A2/P-1” ratings on review for downgrade after the announcement.

Bank of Ireland

Bank of Ireland Plc sank 13 percent to 14.3 euro cents as the lender said it will hold a rights offer with the Irish state underwriting the shares at a price of 10 cents.

Lundin Petroleum AB retreated 3.6 percent to 83.75 kronor as the company acquired a 75 percent interest in a block off the coast of Peninsula Malaysia. Petronas Carigali Sdn Bhd, the country’s national oil company, holds the remaining 25 percent interest.

Stagecoach Group Plc surged 3.8 percent to 249.1 pence, the biggest gain since April 28, after JPMorgan Chase & Co. rated the rail and bus operator “overweight” in new coverage.

Fiat SpA rose 3.6 percent to 7.36 euros, its first advance in three days. Italy’s biggest carmaker will pay $500 million for the U.S. government’s remaining 6 percent stake in Chrysler Group LLC, ending the Treasury’s involvement in the carmaker.

Volvo AB’s Stefano Chmielewski, head of the Renault truck unit, said the company will be interested in buying the Daily range of light trucks produced by Fiat Industrial SpA’s Iveco division, if it goes on sale, according to an interview in Il Sole 24 Ore today. Fiat Industrial’s shares increased 1.4 percent to 9.15 euros.

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

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net

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


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