Bloomberg News

European Stocks Retreat on Moody’s Review; Axa, LSE Lead Decline

December 13, 2011

Dec. 12 (Bloomberg) -- European stocks retreated the most in three weeks as Moody’s Investors Service said it will review the credit ratings of all countries in the region following last week’s debt summit.

Axa SA led insurers lower after Standard & Poor’s placed 15 companies on watch negative. Xstrata Plc slid 5.6 percent as copper retreated. London Stock Exchange Group Plc decreased 4.9 percent as S&P also placed the bourse’s credit rating on review for a downgrade.

The benchmark Stoxx Europe 600 Index lost 1.9 percent to 236.05 at the close of trading, extending this year’s decline to 14 percent. The gauge slid 0.1 percent last week as the European Central Bank damped speculation it would boost bond purchases, overshadowing an agreement by European Union leaders to step up measures to fight the debt crisis.

“A lot and nothing has changed following the most recent EU summit,” Dan Morris, a strategist at JPMorgan Chase & Co. in London, wrote in a report today. “It will be a combination of ECB support for banks and sovereigns, plus individual country progress on reform and austerity packages, which will determine how markets move over the next several months.”

Moody’s said it will review the ratings of all EU countries in the first quarter, saying the summit failed to deliver “decisive policy measures” to end the debt crisis. The review will be completed in the first quarter of next year.

ECB Role

Germany’s top central banker yesterday cooled speculation that the ECB will extend its role after European leaders agreed a new fiscal accord last week.

Bundesbank President Jens Weidmann told the Frankfurter Allgemeine Sonntagszeitung that while the new accord represents “progress,” the onus is on governments rather than the ECB to resolve the crisis. German Finance Minister Wolfgang Schaeuble said euro-area policy makers will now focus on implementing last week’s pact.

National benchmark indexes retreated in all 18 western European markets. France’s CAC 40 slid 2.6 percent, the U.K.’s FTSE 100 fell 1.8 percent and Germany’s DAX lost 3.4 percent.

The Stoxx 600 earlier pared its decline to as little as 0.3 percent after Italy sold 7 billion euros ($9.3 billion) of one- year bills, the maximum for the auction, with a reduced yield. Borrowing costs fell to 5.952 percent today from 6.087 percent at the last sale on Nov. 10 after Prime Minister Mario Monti’s government approved a 30 billion-euro emergency economic plan.

Insurers Fall

Axa, Europe’s second-biggest insurer, dropped 6.5 percent to 10.45 euros, the largest decline since Nov. 1. Allianz SE, the region’s biggest insurer, declined 6.5 percent to 74.24 euros and Italy’s Assicurazioni Generali SpA lost 3.9 percent to 11.95 euros.

S&P placed all three insurers on watch negative after the ratings company started reviewing the credit scores of 15 euro- area governments on Dec. 5.

“Depending on the outcome of our review of the ratings on the euro zone member governments, the long-term ratings on these insurers could be lowered by one or two notches, and short-term ratings for some issuers could be lowered by one notch,” S&P said in a statement.

ING Groep NV, the biggest Dutch financial-services company, sank 8.1 percent to 5.36 euros. The company offered to buy back and exchange 5.8 billion euros of subordinated debt to bolster its finances as regulators demand higher capital reserves.

Xstrata dropped 5.6 percent to 955.4 pence, Kazakhmys Plc slid 6.7 percent to 880 pence and BHP Billiton Ltd. slipped 3.3 percent to 1,897 pence. Copper fell as much as 3.2 percent in London trading as China’s exports cooled.

China Exports

China’s export growth slowed in November to the weakest pace since 2009, making the government more likely to further ease policies to sustain the economy’s expansion. Overseas shipments rose 13.8 percent from a year earlier, the customs bureau said on Dec. 10.

Eurasian Natural Resources Corp. sank 7.4 percent to 634.5 pence even after denying a report in the Sunday Times that Britain’s Serious Fraud Office started an inquiry into allegations of corruption at a Kazakh iron ore unit.

“There is no formal SFO investigation into the company,” said an ENRC spokesperson. “There was nothing new in the Sunday Times story. The internal audit committee investigations and liaison with appropriate regulators, including the SFO, is entirely normal practice for a major company that is serious about investigating all allegations properly and striving to meet corporate governance best practice.”

LSE Rating

LSE declined 4.9 percent to 780 pence. The equity-market operator that also owns a clearinghouse in Italy may have its credit rating cut by S&P because Italian banks’ finances are deteriorating.

Separately, the exchange agreed to buy the 50 percent of FTSE International Ltd. that it doesn’t already own from Pearson Plc for 450 million pounds ($702 million). Pearson shares slid 1.4 percent to 1,128 pence.

Royal Bank of Scotland Group Plc dropped 6.5 percent to 20.56 pence after the Financial Services Authority said in a report that the lender was being investigated before its bailout after it wrongly told regulators it held more cash to cover client withdrawals than the required minimum.

Lloyds Sinks

Rival Lloyds Banking Group Plc retreated 8.6 percent to 24.43 pence, the largest drop since September.

Swedbank AB declined 4.4 percent to 85.15 kronor as Latvians withdrew at least $19 million from the Swedish bank’s automatic teller machines amid concern the lender may close its Estonian business and speculation the ATMs were malfunctioning.

Maris Mancinskis, the head of Swedbank’s Latvian unit, said the speculation was “not only false, but also completely absurd.”

STMicroelectronics NV slid 3 percent to 4.30 euros in Milan, while Infineon Technologies AG slumped 2.4 percent to 5.74 euros in Frankfurt. Intel Corp., the world’s largest chipmaker, reduced its fourth-quarter revenue forecast by about $1 billion, citing a shortage of hard-disk drives for personal computers.

--Editors: Andrew Rummer, Will Hadfield

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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