Bloomberg News

European Stocks Decline as EU Fails to Agree on Greece Payment

June 20, 2011

June 20 (Bloomberg) -- European stocks fell, with the Stoxx Europe 600 Index extending losses into an eighth week, as the region’s governments failed to agree on a payment to spare Greece from default.

Barclays Plc dropped 1.8 percent and Lloyds Banking Group Plc fell 2.6 percent as banks accounted for some of the largest losses on the Stoxx 600. Gamesa Corp Tecnologica SA dropped 7.1 percent after ING Groep NV recommended selling the shares.

The Stoxx 600 retreated 0.5 percent to 265.76 at the 4:30 p.m. close in London. The benchmark index has dropped for seven weeks, its longest streak since 2008, as concern mounted that Greece will fail to repay all of its debt. The gauge has lost 8.7 percent since its peak this year on Feb. 17.

“We’re all a little worried that there aren’t any serious measures yet and we’re not sure that injecting money will solve the whole problem,” said Bruno Ducros, a Paris-based fund manager at CamGestion, which oversees about $3.6 billion in stocks. “Even if there are drastic cost cuts, it will take a long time to resolve the problem.”

The open of equities trading was delayed for an hour on bourses operated by NYSE Euronext in Paris, Amsterdam, Brussels, Luxembourg and Lisbon because of an unspecified computer malfunction, the exchange operator said. NYSE Euronext fixed the breakdown and started trading at 10 a.m. Paris time.

Greece Default Risk

European governments failed to agree to release a loan payment to spare Greece from default, increasing pressure on Prime Minister George Papandreou to deliver further budget cuts in the face of domestic opposition.

On the eve of a confidence vote that may bring down Papandreou’s government, euro-area finance ministers pushed Greece to pass laws to cut the deficit and sell state assets. The ministers left open whether the Mediterranean nation will get the full 12 billion euros ($17.2 billion) promised for July as part of last year’s 110 billion-euro lifeline.

National benchmark indexes fell in every western European market. France’s CAC 40 Index slid 0.6 percent, while Germany’s DAX Index fell 0.2 percent. The U.K.’s FTSE 100 Index slipped 0.4 percent.

Banks were among the worst performing industries in the Stoxx 600, losing 0.9 percent. Barclays dropped 1.8 percent to 252.6 pence, while Lloyds slid 2.6 percent to 47.2 pence. BNP Paribas SA dropped 0.9 percent to 51.75 euros.

Royal Bank of Scotland Group Plc slumped 4.4 percent to 38.5 pence. Britain’s biggest government-owned bank fell after the firm sold shares to fund employee bonuses. RBS placed about 354.6 million shares, according to terms of the deal obtained by Bloomberg News.

Global Banking System

A Greek debt writedown may have consequences for the global banking system similar to those following the collapse of Lehman Brothers Holdings Inc., Swedish newspaper Svenska Dagbladet cited European Central Bank Executive Board member Lorenzo Bini Smaghi as saying.

Gamesa, Europe’s second-largest wind turbine-maker, plunged 7.1 percent to 5.55 euros. The stock was given a “sell” recommendation in new coverage at ING.

Charter International Plc sank 25 percent to 538.5 pence, for the biggest drop on the Stoxx 600. The industrial-equipment manufacturer fell after forecasting that 2011 profit will miss its previous estimates.

Banca Popolare di Milano Scrl tumbled 7.4 percent to 1.63 euros. Banca Popolare dell’Emilia Romagna Scrl said it’s not planning a combination with Popolare di Milano.

Inmarsat Plc rallied 4.6 percent to 590.5 pence as billionaire Philip Falcone’s LightSquared Inc. reached a 15-year deal with Sprint Nextel Corp. to share network expansion costs and equipment, and to provide high-speed wireless services to the phone company. The deal will be “materially positive” for Inmarsat, Goldman Sachs Group Inc. analysts wrote today.

--With assistance from Adam Haigh in London and Giles Broom in Zurich. Editors: Will Hadfield, Chris Nagi

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net

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


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