Bloomberg News

European Stocks Little Changed as Greece Debates Austerity Plan

June 27, 2011

June 27 (Bloomberg) -- European stocks closed little changed as Greek lawmakers debated austerity measures needed to secure more aid and stave off default.

Northumbrian Water Group Plc soared 8 percent after Cheung Kong Infrastructure Holdings Ltd. said it may make a takeover offer for the U.K. utility. Niscayah AB jumped to a three-year high after agreeing to be bought by Stanley Black & Decker Inc. Akzo Nobel NV sank the most in 16 months after the world’s biggest paint maker forecast a drop in profit.

The Stoxx Europe 600 Index advanced less than 0.1 percent to 264.01 at the 4:30 p.m. close in London. The gauge has fallen for eight straight weeks, the longest decline since 1998, as concern grew that Greece will default on its debt and U.S. economic data trailed forecasts. The retreat has left the measure trading at the cheapest valuation compared with reported profits since 2008, according to data compiled by Bloomberg.

“There is clearly a lot of value in Europe but investors don’t like value when there is a lot of fear around,” said Karen Olney, head of thematic equity strategy at UBS AG in London. “Everyone thinks there will probably be a default in Greece, the question is when and how. It’s likely going to be pushed out to 2013 and beyond.”

Greek Vote

Greek lawmakers are due to vote on a five-year austerity plan this week that is crucial for the country to secure more international aid. Failure to pass the plan may lead to the euro area’s first sovereign default as Greece needs to cover 6.6 billion euros ($9.4 billion) of maturing bonds in August.

The first session of the three-day debate began in Athens today and a vote is expected on June 29. An implementation law, which provides the technical details of how the five-year plan will be applied is also due to be discussed and approved by the deadline of June 30.

National benchmark indexes fell in 11 of the 18 western European markets. Germany’s DAX slipped 0.2 percent while France’s CAC 40 gained 0.3 percent and the U.K.’s FTSE 100 rose 0.4 percent. Greece’s ASE dropped 0.5 percent.

“The chance of the Greeks to pass the vote is high but it’s not negligible it will go wrong, so the market is really trading sideways,” said Didier Abbato, a client trading senior manager at Copenhagen-based Saxo Bank.

Northumbrian Water gained 8 percent to 413.5 pence, the biggest increase since February 2010, after Cheung Kong said it’s in the preliminary stages of assessing a possible cash offer for the company. United Utilities Plc, a rival U.K. water company, climbed 3.3 percent to 587.5 pence.

Niscayah, Securitas

Niscayah jumped 16 percent to 18.20 kronor after Stanley Black & Decker agreed to buy the Swedish company for about $1.2 billion to secure expansion in the market for electronic security systems.

Securitas AB, which last month offered to acquire Niscayah through a share swap, advanced 1.8 percent to 62 kronor.

Akzo Nobel tumbled 6.5 percent to 42.76 euros, the biggest drop since February 2010, after the chemical company said second-quarter results will be hurt by higher raw-material prices and one-off costs related to factory maintenance. Earnings before interest, taxes, depreciation and amortization will amount to about 550 million euros. That compares with about 614 million euros a year earlier.

Danish Banks Slide

Danske Bank A/S led Danish banks lower as Fjordbank Mors A/S became the nation’s second regional lender to resort to the state’s bank resolution package in 2011 after it failed to meet solvency requirements.

Danske Bank lost 5.2 percent to 88.60 kroner, Jyske Bank A/S retreated 3.1 percent to 191.5 kroner and Sydbank A/S fell 2.4 percent to 110 kroner.

Cable & Wireless Communications Plc surged 5.3 percent to 39.52 pence. Chief Executive Officer Tony Rice bought 2.5 million shares in the phone company at 37.63 pence apiece before an investor day on July 1.

AstraZeneca Plc fell 1.1 percent to 3,026 pence after the U.K.’s second-biggest drugmaker said patients taking its experimental diabetes pill had more breast and bladder cancers than those on a standard drug.

--With assistance from Peter Levring in Copenhagen, Francois de Beaupuy in Paris, Elisa Martinuzzi in Milan and Liam Vaughan and Francine Lacqua in London. 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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