Bloomberg News

European Stocks Fall to 10-Week Low; Air France, SocGen Decline

June 06, 2011

June 6 (Bloomberg) -- European stocks retreated for a fourth straight day, pulling the benchmark Stoxx Europe 600 Index to a 10-week low, amid growing concern the global economy is weakening.

Unione di Banche Italiane ScpA and Societe Generale SA slid more than 2 percent as a gauge of banks retreated to the lowest since July. Air France-KLM Group and Deutsche Lufthansa AG, Europe’s biggest airlines, fell after a trade group cut the industry’s profit forecast.

The Stoxx 600 declined 0.6 percent to 272.16 at the 4:30 p.m. close in London, the lowest since March 22. The gauge has fallen for five consecutive weeks, the longest stretch of losses since July 2008, as U.S. manufacturing and jobs reports fueled concern the economic recovery may falter and as speculation grew that Greece will default on its debt.

“Investors feel like they are in something of a straight jacket at the moment -- on the right arm you have European debt concerns and on the left arm you have U.S. growth,” said Richard Hunter, head of U.K. equities at Hargreaves Lansdown Plc in London. “Until we get past both of those concerns, it’s difficult to see where a positive catalyst will come from.”

National benchmark indexes fell in 14 of the 16 western European markets trading today. Germany’s DAX Index slid 0.3 percent, France’s CAC 40 lost 0.7 percent, while the U.K.’s FTSE 100 climbed 0.1 percent as mining shares advanced. Sweden and Ireland are closed for a holiday.

Greek Assistance

The European Union and International Monetary Fund last week agreed to pay the next installment to Greece under last year’s bailout, paving the way for an upgraded aid package that includes a “voluntary” role for investors.

In Portugal, opposition Social Democrats ousted the ruling Socialists in elections, putting Pedro Passos Coelho in charge of enforcing austerity measures mandated by a 78 billion-euro ($114 billion) bailout. Coelho, who unseated Prime Minister Jose Socrates, said he would seek to forge a governing majority with the third-place People’s Party to enact budget cuts that risk worsening an economic slump and 12.4 percent unemployment rate.

UBI, the Italian bank that began a rights offer today, retreated 4 percent to 4.60 euros, France’s Societe Generale declined 2.2 percent to 40.09 euros and Lloyds Banking Group Plc, Britain’s biggest mortgage lender, slid 3.8 percent to 46.90 euros. A measure of banks had the biggest drop among 19 industry groups in the Stoxx 600.

Airlines Fall

Air France slipped 1.4 percent to 11.11 euros and Lufthansa lost 1 percent to 14.54 euros. International Consolidated Airlines Group, the parent of British Airways, fell 3 percent to 229.6 pence.

The International Air Transport Association cut its 2011 industry profit forecast by 54 percent because of higher oil prices, political protests in the Middle East and North Africa, and the Japan earthquake.

EON AG fell 2.2 percent to 18.42 euros and RWE AG slid 0.8 percent to 37.88 euros. Analysts at Commerzbank AG reduced their share-price estimates for Germany’s largest utilities by 10 percent “to reflect potential additional burdens” related to the government’s decision to exit nuclear power.

German Chancellor Angela Merkel’s Cabinet today approved an energy overhaul package that seeks to phase out nuclear energy by the end of 2022 and accelerate the country’s turn to renewable resources, the chancellery said in Berlin.

Aegis Advances

Aegis Group Plc climbed 6.9 percent to 151 pence after the U.K. buyer of advertising space said it is in talks about selling its market research unit Synovate to French polling company Ipsos SA.

Bayer AG advanced 1.5 percent to 56.25 euros after Phase III Alsympca trial evaluating its investigational compound radium-223 chloride in patients with castration-resistant prostate cancer and bone metastases was found to significantly improve overall survival.

Glencore International Plc gained 2 percent to 515 pence as Deutsche Bank AG initiated coverage of the world’s largest listed commodity trader with a “buy” recommendation, saying the stock is undervalued.

ProSiebenSat.1 Media AG rose 3.6 percent to 17.96 euros as analysts at Royal Bank of Scotland Group Plc rated Germany’s biggest private broadcaster “buy” in new coverage.

Separately, Sueddeutsche Zeitung reported that Permira Holdings Ltd. is under no pressure to sell its stake in the broadcaster, citing the head of the German operations, Joerg Rockenhaeuser.

--Editor: Andrew Rummer

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

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


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