Bloomberg News

European Stocks Post First Weekly Drop in Six; Lloyds Tumbles

November 07, 2011

Nov. 5 (Bloomberg) -- European stocks fell for the first week in six as Greek Prime Minister George Papandreou issued and then withdrew a pledge to hold a referendum on the latest bailout package for his country, reviving concern that the euro area’s debt crisis will spread.

Lloyds Banking Group Plc slumped 19 percent as the British bank said Chief Executive Officer Antonio Horta-Osorio will go on leave. BNP Paribas SA dropped 15 percent as France’s largest bank reported profit that fell short of analysts’ estimates.

The Stoxx 600 Europe Index slid 3.7 percent to 239.76 this week, snapping a five-week rally, the gauge’s longest winning streak since April. Stocks slid on concern that the leaders of the euro area will fail to speedily implement the region’s rescue plan. Equities extended their losses as Group of 20 leaders meeting in Cannes, France, failed to agree on additional resources for the International Monetary Fund. Stocks dropped even as the U.S. unemployment rate fell to 9 percent.

“We have yet to see a clear and succinct solution to the euro zone’s political-economic concerns,” Fredrik Nerbrand, the head of asset allocation at HSBC Holdings Plc, wrote in a report dated Nov. 2. “The issues surrounding the European financial system will take years to resolve. We have an economic backdrop that is anything but supportive. We remain averse to risk.”

IMF Funding Disagreement

Global policy makers will wait for further details on the increased rescue package before they commit extra cash to the IMF, Merkel said at the end of the G-20 summit in Cannes, France. The IMF could lend any additional money to the European Financial Stability Facility, the currency bloc’s rescue fund.

In the U.S., a Labor Department report showed that the unemployment rate in the world’s largest economy unexpectedly fell to a six-month low of 9 percent in October, from 9.1 percent in September. Employers added 80,000 jobs to their payrolls last month, fewer than economists had forecast. The Labor Department revised up job gains in the previous two months by 102,000.

National benchmark indexes fell in all 18 western European markets this week. The U.K.’s FTSE 100 Index slid 3.1 percent, Germany’s DAX Index lost 6 percent and France’s CAC 40 Index retreated 6.7 percent.

Banks posted the largest weekly declines of the 19 industry groups in the Stoxx 600.

Lloyds tumbled 19 percent as a person familiar with the matter said that Horta-Osorio, who took over eight months ago, suffers from fatigue brought on by overwork. The bank said he acted on medical advice and will return before the end of the year. Lloyds named Finance Director Tim Tookey as interim CEO, even though Tookey will leave the company in February.

BNP Paribas, SocGen

BNP Paribas plunged 15 percent as third-quarter profit fell 72 percent because of a 2.26 billion-euro ($3.1 billion) writedown on its holdings of Greek sovereign debt and losses from selling European government bonds. Societe Generale SA, France’s second-biggest bank, slumped 23 percent.

Homeserve Plc tumbled 34 percent, for the biggest slump on the Stoxx 600 this week, after the U.K.-based emergency-repair service provider suspended all telephone sales and marketing because a review showed sales processes didn’t meet standards.

Vestas Wind Systems A/S tumbled 28 percent as the largest maker of wind turbines cut its forecasts for revenue and margins based on earnings before interest and taxes this year after delays in expanding production at its new plant in Germany.

Cable & Wireless Communications Plc rallied 8.2 percent as growth at the U.K. phone company’s Caribbean and Macau units pushed increases in fiscal first-half sales and earnings.

Next Plc jumped 5.6 percent as the U.K.’s second-largest clothing retailer reported faster sales growth in the third quarter. The company said total brand sales, excluding value- added tax, rose at a faster pace in the period.

--Editors: Will Hadfield, Andrew Rummer

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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