Bloomberg News

European Stocks Fall as Moody’s Downgrades Italy, Spain Ratings

February 15, 2012

Feb. 14 (Bloomberg) -- European stocks declined, paring the Stoxx Europe 600 Index’s biggest rally in a week, after Moody’s Investors Service downgraded six euro-area countries, including Italy, Spain and Portugal.

ThyssenKrupp AG, Germany’s biggest steelmaker, fell 3.8 percent after posting a first-quarter loss following project delays. Royal Dutch Shell Plc gained 1.5 percent, limiting the Stoxx 600’s decline. Nokia Oyj, the biggest maker of mobile phones, rose 2.1 percent after Nokia Siemens Networks’ Chief Executive Officer, Rajeev Suri, was reported to say that he doesn’t rule out holding an initial public offering.

The Stoxx 600 declined 0.2 percent to 262.56 at the close. The gauge rallied 0.7 percent yesterday and has still advanced 7.4 percent this year amid optimism that the euro area will contain its sovereign-debt crisis and as U.S. economic reports beat forecasts.

“The fact that France is still Aaa, for now anyway, re- affirms the status of the European Financial Stability Facility,” the euro area’s temporary bailout fund, said Chris Weston, an institutional trader at IG Markets in Melbourne. “One suspects only modest selling will follow.”

National benchmark indexes declined in all of the 18 western-European markets today except Italy. The U.K.’s FTSE 100 Index slipped 0.1 percent, while Germany’s DAX Index fell 0.2 percent. France’s CAC 40 Index lost 0.3 percent.

Italy, Spain Downgraded

Moody’s said it may strip the U.K. and France of their top Aaa ratings, citing the euro area’s crisis. Spain was downgraded to A3 from A1 yesterday, Italy to A3 from A2 and Portugal to Ba3 from Ba2, all with negative outlooks. Slovakia, Slovenia and Malta also had their ratings lowered.

“Policy makers have made steps forward, but we do not think they have done enough to reassure the market that we are on a stable path,” said Alistair Wilson, chief credit officer for Europe at Moody’s in London. “What will guide long-term ratings is the clarity and the performance of policy makers and the macro picture.”

German investor confidence increased in February more than economists had forecast, rising to a 10-month high. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, rose to 5.4 from minus 21.6 in January. Economists had predicted a gain to minus 11.8, according to the median of 40 estimates in a Bloomberg News survey.

Italy’s Debt Sale

Italy sold 6 billion euros ($7.9 billion) of bonds at an auction, meeting its target. The country’s borrowing costs fell to the lowest since March even after Moody’s Investors Service lowered its rating for the nation. Italy’s Treasury sold 4 billion euros of benchmark securities due in November 2014 to yield 3.41 percent, down from 4.83 percent at the last auction of similar-maturity bonds on Jan. 13. The Rome-based Treasury also sold a total of 2 billion euros of bonds due in 2015 and 2017 to yield 3.77 percent and 4.26 percent respectively.

In the U.S., retail sales rose in January by 0.4 percent, according to a report from the Commerce Department. Last month’s advance was half the 0.8 percent median forecast of economists surveyed by Bloomberg News, reflecting an unexpected drop in sales at car dealers. Excluding cars, demand climbed 0.7 percent, more than projected.

ThyssenKrupp Slides

ThyssenKrupp dropped 3.8 percent to 21.07 euros after reporting a loss before interest and taxes of 33 million euros, compared with a profit of 261 million euros a year earlier.

Rio Tinto Group decreased 3.1 percent to 3,727.5 pence as the world’s third-biggest mining company approved a $4.5 billion expansion of its Chilean Escondida copper mine with BHP Billiton Ltd. The mine accounts for about a fifth of all copper produced in Chile, the world’s top supplier of the metal. BHP Billiton slipped 0.5 percent to 2,072 pence.

TDC A/S, Denmark’s largest phone company, slid 4.3 percent to 43.28 euros as its private-equity investors sold 750 million euros of stock in a sale arranged by Morgan Stanley. Investors in NTC Holding GP & Cie. SCA, the consortium of buyout firms, sold about 128 million shares, raising 5.6 billion Danish kroner ($990 million).

Storebrand ASA sank 14 percent to 25.40 kroner after Norway’s largest publicly traded insurer posted fourth-quarter profit that plunged and said it will pay no dividend for 2011.

Raiffeisen Bank International AG, the biggest Eastern European lender, retreated 5 percent to 26.50 euros as Moody’s cut the rating outlook of Austria to “negative” from “stable.”

Shell, Nokia Advance

Shell climbed 1.5 percent to 2,331.5 pence as Europe’s largest oil company limited losses on the Stoxx 600.

Nokia rose 2.1 percent to 3.84 euros after Nokia Siemens Networks’ CEO, Suri, did not rule out an IPO of the joint venture between Siemens AG and Nokia, Capital magazine reported, citing an interview.

Nokia Siemens plans to create a “strong, profitable” company that can exist on its own, the magazine cited Suri as saying. Management wants to make sufficient progress to make a share sale an option for the owners, according to the magazine.

L’Oreal SA gained 3.8 percent to 84.73 euros after the world’s largest cosmetics maker said it’s confident of achieving sales and earnings growth this year after reporting a 7.7 percent increase in 2011 operating profit, beating analysts’ estimates.

L’Oreal also said that Liliane Bettencourt will leave the company’s board and be replaced by her grandson Jean-Victor Meyers. Meyers, 25, studied economics and management and is a director of Tethys, the Bettencourt family holding company.

Deutsche Boerse AG added 2.4 percent to 49.94 euros after the German bourse operator posted a fourth-quarter profit amid lower costs and higher sales while announcing a stock buyback and dividend.

--With assistance from Adria Cimino in Paris. Editors: Will Hadfield, Andrew Rummer

To contact the reporter on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net

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


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