Bloomberg News

European Stocks Decline for Seventh Week; Celesio Shares Tumble

June 17, 2011

June 18 (Bloomberg) -- European stocks fell, with the benchmark Stoxx Europe 600 Index declining for a seventh week, as concern mounted that the European Union may delay a second rescue plan for Greece.

Celesio AG posted the biggest decline among companies on the Stoxx 600, tumbling 20 percent, as Europe’s largest drug wholesaler said profit this year may fall as government measures across the continent and more competition in Germany hurt results. Alpha Bank SA and EFG Eurobank Ergasias SA, soared more than 5 percent, as Greek banks were among shares posting the biggest rally on the Stoxx 600.

The Stoxx 600 index retreated 0.4 percent to 267.17 this week for its longest weekly losing streak since 2008. European stocks pared their weekly loss after German Chancellor Angela Merkel signaled a willingness to compromise on demands that bondholders shoulder part of a Greek rescue and Nicolas Sarkozy said a “breakthrough” had been made on the Mediterranean country’s debt crisis.

“It may prevent a credit event and subsequent contagion,” said Atif Latif, the director of trading at Guardian Stockbrokers in London. “We see this as a small step towards an agreement.”

Merkel said on June 17 that she’ll work with the European Central Bank to resolve the crisis. Almost $4 trillion has been erased from the value of global equities since this year’s peak on May 1, amid signs the U.S. economy was struggling to rebound and concern that Greece’s credit crisis may spread.

“We would like to have a participation of private creditors on a voluntary basis,” Merkel told reporters in Berlin at a joint press conference with Sarkozy. “This worked out jointly with the ECB. There shouldn’t be any dispute with the ECB on this.”

Greece Government Reshuffle

Greek Prime Minister George Papandreou earlier named Evangelos Venizelos as finance minister in a cabinet overhaul aimed at fending off a rebellion in the ruling Pasok party and passing austerity measures. Former Federal Reserve Chairman Alan Greenspan said that a Greek default is “almost certain” and may drive the U.S. into recession.

“As the Greek saga unravels, we believe investors are not rewarded for taking risk,” Fredrik Nerbrand, the head of global asset allocation at HSBC Holdings Plc in London, wrote in a report. “For now, our main focus is capital preservation.”

Cash Holdings Climb

Global investors increased their cash holdings to the highest in a year this month and reduced their holdings of equities and commodities, according to a BofA Merrill Lynch Global Research survey of investors conducted from June 3 to June 9. A net 18 percent of 282 respondents were “overweight” cash, the highest since June 2010, according to the survey. The 282 respondents managed a combined $828 billion.

In the U.S., the Conference Board’s gauge of leading indicators, which measures the outlook for the next three to six months, rose 0.8 percent, the New York-based group said. That beat the average economist forecast for an increase of 0.3 percent in a Bloomberg News survey.

Celesio AG tumbled 20 percent. The company forecast that it will generate annual earnings before interest, taxes, depreciation and amortization of just more than 600 million euros ($860 million). Analyst predictions for this year ranged from 630 million euros to 690 million euros.

Carrefour SA sank 6.5 percent after the world’s second- largest retailer by sales said first-half results in France fell short of management’s expectations.

Alpha Bank, Eurobank

Alpha Bank jumped 5.4 percent and EFG Eurobank Ergasias soared 5.3 percent.

Zodiac Aerospace rallied 8.3 percent after increasing its sales forecast. BofA Merrill Lynch Global Research subsequently upgraded its recommendation on the shares to “buy” from “underperform.”

Carmakers across Europe climbed. Bayerische Motoren Werke AG gained 3 percent, Daimler AG rose 1.6 percent and Volkswagen AG advanced 3.8 percent.

--Editor: Will Hadfield

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

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


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