Bloomberg News

European Stocks Slide as Leaders Split; UniCredit, Actelion Fall

October 20, 2011

Oct. 20 (Bloomberg) -- European stocks declined the most in two weeks amid concern the euro area’s leaders are far from agreeing on a plan to end the region’s debt crisis.

Intesa Sanpaolo SpA and UniCredit SpA led a selloff in banks, sliding more than 9 percent, as corporate bond risk advanced. Actelion Ltd. sank the most in more than 18 months as Europe’s largest biotechnology company said it expects drug sales to decrease next year. Schneider Electric SA, the world’s biggest maker of low- and medium-voltage equipment, plunged 7.6 percent after trimming its 2011 profit target.

The benchmark Stoxx Europe 600 Index slid 1.5 percent to 233.07 at the close of trading, extending losses after Die Welt reported that Germany hasn’t ruled out postponing a euro-area summit planned for Oct. 23. That’s the biggest decline since Oct. 4 and brings the retreat from this year’s high in February to 20 percent.

“The markets demand a solution now,” said Ben Hauzenberger, a Zurich-based fund manager at Swisscanto Asset Management AG, which oversees $53 billion. “The current flight- to-quality behavior of investors shows just how little confidence they have.”

National benchmark indexes fell in 16 of the 18 western European markets. The U.K.’s FTSE 100 dropped 1.2 percent, France’s CAC 40 retreated 2.3 percent and Germany’s DAX slipped 2.5 percent.

Comprehensive Strategy

Euro-area leaders are scheduled to meet on Oct. 23, with disagreement over the European Central Bank’s role threatening to hinder progress on the banking and economic questions needed to deliver the comprehensive strategy demanded by global policy makers. The German government hasn’t excluded postponing the summit because of stalling negotiations on boosting the firepower of the region’s rescue fund, Die Welt said, citing unidentified people close to the country’s governing coalition.

French President Nicolas Sarkozy flew to Frankfurt for an impromptu meeting last night with German Chancellor Angela Merkel, ECB President Jean-Claude Trichet and International Monetary Fund Director Christine Lagarde. Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of euro-area finance ministers, indicated the gathering failed to resolve differences. “We are still meeting,” he said as he departed.

“It appears that we might still be some miles away from a general agreement on that plan,” said Jean-Paul Jeckelmann, chief investment officer at Banque Bonhote & Cie. in Neuchatel, Switzerland, who helps manage $1.4 billion in equities. “Going into the weekend, the odds are investors are placed for disappointment.”

Credit Lines

The euro area may offer “massive” credit lines to countries such as Italy and Spain, according to draft guidelines for the Oct. 23 summit. The European Financial Stability Facility may offer as much as 10 percent of a member states’ gross domestic product in precautionary aid “before they face difficulties raising funds” in bond markets, the draft shows.

Banks led losses in the Stoxx 600 as the cost of insuring against default on European corporate debt climbed and the yield on Italian 10-year government bonds rose to more than 6 percent for the first time since August.

Intesa Sanpaolo, Italy’s second-biggest bank, dropped 9.8 percent to 1.20 euros and UniCredit, the nation’s largest lender, tumbled 12 percent to 84.6 euro cents. France’s Societe Generale SA lost 7.6 percent to 17.97 euros in Paris.

Actelion, Schneider

Actelion plunged 9.7 percent to 30.70 Swiss francs, the biggest slump since March 2010, after it said product sales will fall in the low- to mid-single digit range next year in local currencies. The company cited increased pricing pressure and competition in the U.S.

Schneider Electric tumbled 7.6 percent to 41.22 euros. The company trimmed its 2011 profit target for the second time in four months on rising labor costs in emerging economies and said it may cut jobs. Earnings before interest, taxes and amortization will probably account for about 14 percent of revenue this year, down from a July forecast of about 15 percent, it said.

Rio Tinto Group, the world’s second-largest mining company, slid 3.9 percent to 3,015 pence as copper dropped for a fourth day in London trading. Kazakhmys Plc lost 5 percent to 830.5 pence, while Fresnillo Plc slid 3.7 percent to 1,498 pence.

Nokia, Ericsson Rally

Nokia Oyj rallied 5.5 percent to 4.73 euros after the Finnish maker of mobile phones reported a smaller-than-estimated loss and forecast a profitable quarter for the handset business.

Ericsson AV, the world’s largest maker of wireless network equipment, rose 4 percent to 68.10 kronor after saying third- quarter net income climbed to 3.82 billion kronor ($580 million) from 3.68 billion kronor a year earlier. That topped the 3.66 billion-krona estimate of 21 analysts in a Bloomberg survey.

Home Retail Group Plc climbed 3.9 percent to 103.4 pence after a report showed U.K. retail sales unexpectedly rose 0.6 percent in September, the most in five months. Debenhams Plc, which reported better-than-estimated earnings today, advanced 7.7 percent to 67.6 pence.

Husqvarna AB gained 6.7 percent to 32.02 kronor, the biggest increase since July 2010. The world’s largest maker of powered gardening tools has solved U.S. production problems that have sapped profits this year, acting Chief Executive Officer Hans Linnarson said.

--With assistance from Sarah Jones in London. Editors: Andrew Rummer, Will Hadfield

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

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


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