Bloomberg News

Europe Stocks Fluctuate, U.S. Futures Drop; BNP Falls

September 14, 2011

(Removes reference to fund managers in bank report in eighth paragraph of story published Sept. 13.)

Sept. 13 (Bloomberg) -- European stocks swung between gains and losses, with the Stoxx Europe 600 Index traded near a two- year low, as bank shares reversed their earlier losses. U.S. futures dropped, while Asian shares were little changed.

BNP Paribas lost 3.3 percent as France’s largest bank denied an article in the Wall Street Journal that said it was having problems obtaining funding in U.S. dollars. Cairn Energy Plc sank 10 percent, for the largest drop on the Stoxx 600, after abandoning its second oil well in less than two months.

The Stoxx 600 slid 0.1 percent to 218.65 at 12:48 p.m. in London after climbing as much as 1.4 percent and dropping as much as 1.5 percent. The gauge has fallen 25 percent from this year’s peak on Feb. 17 as European and U.S. economic reports trailed forecasts, adding to concern that the global economic recovery is at risk. The retreat has left the gauge trading at 9 times the estimated earnings of its companies, the lowest valuation since March 2009, according to data compiled by Bloomberg.

“There is a serious risk of a further escalation of the crisis,” Tammo Greetfeld, an equity strategist at UniCredit SpA in Munich wrote in a report. “Success in stabilizing the euro zone depends even more on effective reforms being implemented soon. We remain underweight euro zone equities.”

French Bank Capital

The MSCI Asia Pacific Index gained 0.2 percent today, while Standard & Poor’s 500 Index futures expiring in December lost 0.6 percent.

Former Bank of England Deputy Governor Howard Davies said France will have to provide capital to its banks because private investors appear unwilling to provide funds.

“There’s no alternative now in France but for the government to provide new capital,” Davies said. “The French government are going to have to stand up, and within the next two to three days, the French government will have to recapitalize their banks.”

U.S. money-market fund managers have cut their lending to French banks at a pace that may force the lenders to raise capital by selling assets, according to William Prophet, an analyst at Deutsche Bank Securities Inc.

Prime money funds in the U.S. reduced their holdings in certificates of deposits issued by French banks by about 40 percent in the three months through Aug. 11, Prophet wrote in a Sept. 9 report, based on a review of seven of the 10 largest funds eligible to purchase corporate debt.

Representatives of the so-called troika of the International Monetary Fund, European Central Bank and European Commission representatives will return to Greece this week, German Chancellor Angela Merkel said in an interview to be broadcast today.

Italy, China Talks

Italy’s Treasury sold 3.9 billion euros ($5.3 billion) of a new benchmark five-year bond at an average yield of 5.6 percent, compared with 4.93 percent the last time securities of a similar maturity were sold on July 14. Demand was 1.28 times the amount on offer, compared with 1.93 times at the previous sale. The Treasury had aimed to sell 4 billion euros.

Italian officials have held talks in the past few weeks with Chinese counterparts about potential investments in the country, an Italian government official said yesterday, adding that bonds weren’t the focus.

-- Editors: Will Hadfield, Andrew Rummer

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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