Bloomberg News

European Stocks Decline as Papandreou Calls Confidence Vote

June 16, 2011

June 16 (Bloomberg) -- European stocks fell to a three- month low as Greek Prime Minister George Papandreou said he will reshuffle his cabinet and seek a confidence vote.

Vedanta Resources Plc led basic-resource shares lower as metal prices fell. Lenzing AG dropped 2.7 percent as the Austrian maker of textile fibers and its majority shareholder B&C Industrieholding GmbH sold about 619 million euros ($877 million) of shares. Carrefour SA tumbled 3.5 percent as UBS AG recommended selling shares of the French retailer.

The benchmark Stoxx Europe 600 Index fell 0.5 percent to 266.73 at the 4:30 p.m. close in London, its lowest level since March, as all but three industry groups slid. The gauge has lost 8.4 percent since this year’s high on Feb. 17 as a slowdown in U.S. job creation suggested the economic recovery is faltering and speculation grew that Greece will default on its debt.

“The situation is very terrible at the moment because there are so many stories about the debt crisis out there and nobody knows what the solution is,” said Markus Wallner, a senior equity strategist at Commerzbank AG in Frankfurt. “The equity market will only turn around when we finally agree on a solution. Economic data showing no sign that the U.S. is in recovery mode are not helping either.”

Papandreou Address

Papandreou sought to reassert his authority in a televised address last night hours after police used tear gas to break up protests in central Athens. Thousands remained outside Parliament late into the evening, with police estimating the crowd at 8,000 people at 10:20 p.m. local time.

European Union talks to forge a new bailout to prevent the first euro-area default stalled. The impasse over the aid formula and speculation that a government shakeup would disrupt the passage of budget cuts and asset sales sent Greek bonds and the euro plunging yesterday.

The International Monetary Fund today said it is ready to continue supporting Greece if the economic measures agreed upon as part of a bailout package with the European Union are adopted.

European stocks maintained declines today even after reports showed that housing starts in the U.S. increased more than forecast in May and fewer Americans than predicted filed applications for unemployment benefits last week.

National benchmark indexes fell in all of the 18 western European markets. Germany’s DAX Index slipped 0.1 percent, the U.K.’s FTSE 100 Index lost 0.8 percent and France’s CAC 40 Index retreated 0.4 percent.

Vedanta Resources, Antofagasta

Vedanta Resources lost 2.4 percent to 1,935 pence, Anglo American Plc declined 1.8 percent to 2,811 pence, while Antofagasta Plc dropped 2 percent to 1,215 pence. Aluminum, copper, lead, nickel, tin and zinc all fell on the London Metal Exchange.

Lenzing dropped 2.7 percent to 89.49 euros after the company sold 825,000 new shares generating gross proceeds of 76 million euros. The shares were sold at 92 euros apiece, the bottom end of a 92-euro-to-108-euro range set on May 29, and will will start trading in Vienna on June 17.

Societe Generale SA lost 1.7 percent to 38.14 euros, while Banca Popolare di Milano Scrl retreated 2.8 percent to 1.57 euros and Dexia SA, the lender to local governments that was rescued by France and Belgium in 2008, fell 3.2 percent to 2.19 euros, its lowest price in more than two years. Brussels-based Dexia has 5.4 billion euros outstanding in Greece, according to CreditSights.

The ECB said yesterday that the threat of the Greek debt crisis spilling over into the banking sector is the biggest risk to the region’s financial stability.

Greek Banks

Alpha Bank SA, Greece’s third-biggest lender, dropped 4.3 percent to 3.12 euros, while National Bank of Greece SA, the country’s largest lender, declined 4.2 percent to 4.38 euros. EFG Eurobank Ergasias SA lost 3.3 percent to 2.90 euros.

Alcatel-Lucent SA, France’s largest telecommunications equipment maker, led technology stocks lower, falling 1.5 percent to 3.63 euros. U.S.-based Finisar Corp., a maker of fiber-optic transmission gear, reported fourth-quarter revenue of $236.95 million, missing the average analyst estimate of $243 million.

Carrefour tumbled 3.5 percent to 27.75 euros as UBS downgraded the world’s second-largest retailer to “sell” from “neutral.” Casino Guichard-Perrachon SA, a French operator of hypermarkets and supermarkets, fell 3.3 percent to 66.77 euros as it was cut to “equal weight” from “overweight” at Morgan Stanley.

U.K. Retail Sales

A report today showed U.K. retail sales dropped more than economists forecast in May. Sales fell 1.4 percent from April, when they rose 1.1 percent, boosted by warm weather and an extra public holiday, the Office for National Statistics said in London. Tesco Plc fell 1.7 percent to 397.4 pence, while Next Plc retreated 1.6 percent to 2,196 pence.

Demag Cranes AG gained 2.3 percent to 45.30 euros, the first advance this week, after Terex Corp. agreed to buy the German company. Terex first raised its offer price for Demag to 45.50 euros a share from an earlier 41.75 euros a share. The price is 25 percent higher than Demag’s close on April 29, the last day of trading before the Westport, Connecticut-based company’s first proposal.

--With assistance from Sarah Jones in London. Editors: Jason Carey, Will Hadfield

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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