Bloomberg News

European Stocks Drop as G-20 Rebuffs Boosting IMF Resources; HSBC Declines

February 27, 2012

A.P. Moeller-Maersk A/S slipped 4 percent after saying that its container division will make a loss this year. Photographer: Brendon O'Hagan/Bloomberg

A.P. Moeller-Maersk A/S slipped 4 percent after saying that its container division will make a loss this year. Photographer: Brendon O'Hagan/Bloomberg

European stocks declined, extending last week’s retreat, as the Group of 20 nations rejected calls from the euro area to increase the International Monetary Fund’s lending resources.

HSBC Holdings Plc (HSBA) lost 3.7 percent after pretax profit at Europe’s largest bank missed analysts’ estimates. A.P. Moeller- Maersk (MAERSKB) A/S slipped 3.7 percent after saying that its container division will make a loss this year. Airlines fell as crude oil traded near a nine-month high.

The Stoxx Europe 600 Index (SXXP) slid 0.3 percent to 263.86 at the close, after earlier falling as much as 1.2 percent. The benchmark measure extended last week’s 0.4 percent retreat. The gauge has still climbed 7.9 percent this year buoyed by U.S. economic reports and as investors speculated that the euro area will contain its sovereign-debt crisis.

“I don’t think the market really anticipated the G-20 would come up with anything different,” said Jeremy Batstone- Carr, head of research at Charles Stanley & Co. in London. “The fact of that matter is -- as it stands -- the firewall is still insufficient. The higher oil price is another uncertainty in investors’ minds and it is contributing to this slightly risk- off day today.”

G-20 officials told the euro area’s political leaders to provide more financial firepower before they consider lending their support, putting the onus on Germany, already the biggest national contributor to the bailouts.

Germany went to the Mexico meetings of finance ministers and central bankers urging G-20 nations to find further money that the IMF could channel to the euro area.

IMF Managing Director Christine Lagarde, who attended the talks, said she wants to increase the fund’s lending capacity by $500 billion so that it can fend off “further shocks” to the global economy.

Germany’s Bailout Vote

Germany’s parliament approved the second Greek aid package in Berlin today after the close of equity markets. The country’s government must decide whether to back plans at a March 1-2 European Union summit to combine rescue funds for the euro area and produce a potential firewall of 750 billion euros ($1 trillion).

Chancellor Angela Merkel today said there remained no need to increase the lending capacity of the euro area’s bailout mechanisms, citing lower borrowing costs for the currency region’s most-indebted members.

National benchmark indexes fell in 13 of the 17 western- European markets that were open today. France’s CAC 40 Index fell 0.7 percent, Germany’s DAX Index lost 0.2 percent and the U.K.’s FTSE 100 Index slid 0.3 percent.

Earnings Season

Seventy-seven companies on the Stoxx 600 (SXXP) are scheduled to report financial results this week, including eight today. Of the 214 that have reported quarterly earnings so far, 108 have missed analysts’ estimates, while 94 have beaten them, according to data compiled by Bloomberg.

HSBC fell 3.7 percent to 553.5 pence, the biggest contribution to the Stoxx 600 (SXXP)’s retreat, after reporting a 15 percent increase in pretax profit to $21.9 billion last year. That missed the $22.3 billion median analyst estimate. Chief Executive Officer Stuart Gulliver told reporters the lender remained “confident” of hitting its 12 percent return-on- equity target by 2013.

Maersk (MAERSKB) slid 3.7 percent to 43,840 kroner after the shipping company posted a 43 percent drop in 2011 profit to 15.2 billion kroner ($2.7 billion). That compared with the average analyst estimate of 14.8 billion kroner. Falling freight rates pushed its container line to a loss in 2011. The company said that the division will also lose money in 2012.

Air France, Lufthansa

Air France-KLM (AF) Group dropped 2.5 percent to 4.35 euros as crude oil traded near a nine-month high of $109.77 a barrel in New York. Deutsche Lufthansa AG (LHA) lost 2.4 percent to 10.17 euros and Ryanair Holdings Plc slid 1.4 percent to 4.04 euros.

Prices gained the most in two months last week as sanctions tightened against Iran, OPEC’s second-biggest producer. The contract for April delivery fell as much as 1.4 percent to $108.24 a barrel today as investors speculated that prices may have climbed too far.

Carnival Plc, the world’s largest cruise-line owner, declined 1.7 percent to 1,841 pence. The shares extended losses after the Italian Coast Guard said a fire aboard Costa Crociere SpA’s cruise ship Costa Allegra had been extinguished and all the passengers were safe.

Essar Energy Plc (ESSR) tumbled 15 percent to 107.6 pence after the Indian power producer and oil refiner said it made a loss after taxes of $568 million in 2011 after the Supreme Court of India overturned a decision to defer payment of sales taxes.

Associated British Foods Plc (ABF) fell 1.6 percent to 1,200 pence after the world’s second-biggest sugar producer forecast that first-half profit will exceed the previous year.

Nokia Shares Tumble

Nokia Oyj (NOK1V) sank 6.1 percent to 4.06 euros after the world’s third-largest smartphone maker by shipments revealed its latest devices at the Mobile World Congress in Barcelona, including the Lumia 610. The shares rallied 5.6 percent on Feb. 24 after the company said it would announce “significant industry news” at the MWC.

Porsche SE rallied 3.1 percent to 50.07 euros after people familiar with the matter said Volkswagen AG (VOW), Europe’s largest carmaker, is close to a deal to purchase the 50.1 percent stake in Porsche’s automotive business that it doesn’t already own. The company may announce a plan within the next two weeks, said the people who declined to be identified.

BP Plc (BP/) added 1.1 percent to 501.7 pence. Europe’s second- largest crude producer and plaintiffs suing over the 2010 Gulf of Mexico oil spill have discussed a $14 billion accord that the company would fund with money originally set aside for out-of- court settlements, said three people familiar with the talks.

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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