Bloomberg News

European Stocks Slide Amid Concern Over Greek Aid, U.S. Economy

June 15, 2011

June 15 (Bloomberg) -- European stocks fell for the first time this week amid concern that divisions between European officials may delay a second rescue plan for Greece and as a gauge of manufacturing in the New York area unexpectedly sank.

National Bank of Greece SA tumbled the most in three months. BNP Paribas SA, Societe Generale SA and Credit Agricole SA, France’s biggest lenders, declined after Moody’s Investors Service placed their credit ratings on review to scrutinize their holdings of Greek debt. Hennes & Mauritz AB dropped 2.6 percent after Europe’s second-largest clothing retailer reported sales figures.

The Stoxx Europe 600 Index slid 1.1 percent to 267.95 at the 4:30 p.m. close in London. The gauge has fallen 8 percent from this year’s high on Feb. 17 as a slowdown in U.S. job creation suggested the economic recovery may be faltering and speculation grew that Greece might default on its debt.

“If history is any guide, the current sovereign debt problems will not get resolved in a clean way anytime soon,” said Anthony Morris, a strategist at Nomura Holdings Inc. in London. “It will take time for the Greek government to implement reforms. It will take time for the reforms to have an effect. It will take time for creditors to build up a sufficient capital cushion so that they can write down their exposure, which they will ultimately have to do.”

FTSE, DAX

National benchmark indexes declined in all of the 18 western European markets, except Iceland. The U.K.’s FTSE 100 slid 1 percent, France’s CAC 40 dropped 1.5 percent and Germany’s DAX retreated 1.3 percent.

The Stoxx 600 has posted six straight weeks of declines, the longest losing streak in almost three years. The drop has left the index trading at about 12.7 times the reported earnings of its companies, the cheapest valuation since 2008, according to data compiled by Bloomberg.

An emergency session of finance ministers in Brussels late yesterday failed to reconcile a German-led push for bondholders to shoulder part of the cost of a new Greek aid package with European Central Bank warnings backed by France that the move might constitute the euro area’s first sovereign default.

With consensus elusive before the target date of a leaders’ summit late next week, finance ministers agreed to convene again on June 19, a day earlier than planned. Talks may drag on into July, Luxembourg’s Finance Minister Luc Frieden said.

U.S. Economy

The Federal Reserve Bank of New York’s general economic index dropped to minus 7.8 in June, the lowest level since November, from 11.9 in May. The median forecast in a Bloomberg survey of economists was 12. Readings greater than zero signal expansion in the so-called Empire State Index.

Separate U.S. data today showed consumer prices increased 0.2 percent more than estimated, while industrial production trailed projections.

Banks were the worst-performing industry among 19 in the Stoxx 600, falling 2 percent. National Bank of Greece, the nation’s biggest lender, retreated 6 percent to 4.57 euros, the largest drop since March 8.

Greek banks will be asked to maintain a 10 percent Core Tier I capital from 2012, Kathimerini reported, citing George Provopoulos, the head of the country’s central bank. That will include government preference shares issued to the lenders and has been agreed with the European Union and International Monetary Fund as part of a plan to shield banks, the newspaper said, without saying where it got the information.

French Banks

BNP Paribas fell 2.5 percent to 51.30 euros, Societe Generale lost 2.6 percent to 38.78 euros and Credit Agricole slid 2.5 percent to 9.90 euros.

Moody’s placed the three banks’ ratings on review that will focus on their holdings of Greek public and private debt “and the potential for inconsistency between the impacts of a possible Greek default or restructuring and current rating levels,” the ratings company said.

Banco Santander SA, Europe’s second-largest bank, fell 3 percent to 7.62 euros as the Spanish central bank called for Spain’s 17 regions help control public finances. Italy’s Banco Popolare dell’Emilia Romagna Scrl plunged 6.7 percent to 7.27 euros and Banco Comercial Portugues SA lost 6.1 percent to 41.3 euro cents.

Hennes & Mauritz slid 2.6 percent to 218 kronor. The retailer said sales at stores open at least a year gained 2 percent in May.

Experian Falls

Experian Plc dropped 1.9 percent to 785 pence as the U.S. Consumer Financial Protection Bureau was said to be likely to place the world’s largest credit-checking company under direct supervision by federal examiners.

The company may be ruled a “larger participant” in consumer financial services, Corey Stone, the consumer agency’s assistant director for credit information markets, told consumer advocates last month, according to three people present at the meeting.

Gas Natural SDG SA climbed 3.5 percent to 13.78 euros after agreeing to pay Sonatrach $1.9 billion to settle a dispute and saying the Algerian natural gas company may take a stake in its Spanish distributor.

--Editor: Andrew Rummer

To contact the reporter on this story: Peter Levring in Copenhagen at Plevring1@bloomberg.net

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


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