Bloomberg News

European Stocks Fall as S&P Sees More Greek Restructuring

March 29, 2012

Hennes & Mauritz AB, Europe’s second-largest clothing retailer, dropped the most since November after reporting earnings that missed estimates. Photographer: Linus Hook/Bloomberg

Hennes & Mauritz AB, Europe’s second-largest clothing retailer, dropped the most since November after reporting earnings that missed estimates. Photographer: Linus Hook/Bloomberg

European stocks declined the most in more than three weeks as Standard & Poor’s said Greece may have to restructure its debt again and more Americans than forecast filed claims for jobless benefits.

Hennes & Mauritz AB (HMB), Europe’s second-largest clothing retailer, dropped the most in six months as earnings missed estimates. Banca Monte dei Paschi di Siena SpA, Italy’s third- biggest bank, tumbled 11 percent after posting a record loss. FirstGroup Plc (FGP), Britain’s biggest train operator, sank 14 percent amid “challenging trading conditions” at its bus unit.

The Stoxx Europe 600 Index (SXXP) dropped 1.3 percent to 260.74 at the close, the biggest decline since March 6. The gauge has still climbed 6.6 percent in 2012, the best start to a year since 2006, as the European Central Bank lent about $1.3 trillion to the region’s financial institutions. The number of shares changing hands was 16 percent more than the average over the last 30 days, data compiled by Bloomberg show.

“After the strong gains through the first quarter, it’s very reasonable that trading is soft as investors consider their positions in the wake of some soft data recently,” said Michael Droescher Joergensen, an equity strategist at Nykredit Bank A/S in Copenhagen.

National benchmark indexes fell in all of the 18 western European markets, except Iceland. The U.K.’s FTSE 100 slipped 1.2 percent, while France’s CAC 40 Index declined 1.4 percent and Germany’s DAX slumped 1.8 percent.

Greek Restructuring

Greece will probably have to restructure its debt again and this may involve bailout partners such as the International Monetary Fund, Moritz Kraemer, head of sovereign ratings at S&P, said at an event in London late yesterday.

There may be “down the road, I’m not predicting today when, another restructuring of the outstanding debt,” he said. “At that time maybe the official creditors need to come into the boat.”

Speaking at the same event at the London School of Economics, Poul Thomsen, the IMF mission chief to Greece, said while the country has made an “aggressive” fiscal adjustment, it will take at least a decade to fully complete the country’s restructuring.

European governments are preparing for a one-year increase in the ceiling on rescue aid to 940 billion euros ($1.25 trillion) to keep the debt crisis at bay, according to a draft statement written for finance ministers before they meet in Copenhagen tomorrow. German Chancellor Angela Merkel this week gave her first indication that she is prepared to allow an increase in the firewall.

Euro-Area Confidence

An indicator of economic confidence in the euro region unexpectedly declined in March. An index of executive and consumer sentiment in the 17-nation euro area dropped to 94.4 from a revised 94.5 in February, the European Commission said.

In the U.S., initial jobless claims fell 5,000 in the week ended March 24 to 359,000, the Labor Department reported today. The median forecast of economists in a Bloomberg News survey called for 350,000 claims.

The U.S. economy grew at a 3 percent annual rate in the last three months of 2011, the same as previously estimated, while corporate profits climbed at the slowest pace in three years, raising the risk that business investment and hiring will cool.

H&M Slides

H&M dropped 4.9 percent to 238.1 kronor in Stockholm, the largest decline since September, after reporting first-quarter profit that missed analysts’ estimates as textile costs and markdowns weighed on profitability.

Inditex SA (ITX), Europe’s biggest clothing retailer, slipped 1.7 percent to 70.87 euros in Madrid trading.

Monte dei Paschi di Siena lost 11 percent to 32.1 euro cents. The bank posted a record loss in the fourth quarter after 4.5 billion euros of writedowns related to acquisitions including Banca Antonveneta in 2007.

Banca Popolare di Milano Scarl slid 10 percent to 39.88 euro cents, the largest drop in three months, and Banco Popolare SC retreated 7.4 percent to 1.41 euros.

FirstGroup plunged 14 percent to 247.4 pence, the biggest drop since January 2009, after the company said its facing “challenging trading conditions” in its U.K. bus business because of the economy.

Rival U.K. bus operators also retreated. Stagecoach Group Plc (SGC) and National Express Group Plc (NEX) dropped 3.8 percent to 253 pence and 5.1 percent to 239.2 pence, respectively.

Roche Holding AG (ROG), the biggest maker of cancer drugs, fell 1.8 percent to 157 francs after raising its hostile takeover offer for Illumina Inc. by 15 percent to about $6.7 billion.

Automakers Fall

Daimler AG, the maker of Mercedes luxury cars, dropped 3.3 percent to 44.27 euros while shares of Volkswagen AG, Europe’s largest automaker, decreased 2.5 percent to 129.65 euros as a gauge of European carmakers was the second-worst performer among all 19 industry groups in the Stoxx Europe 600 Index. (SXXP)

International Power Plc (IPR) rallied 5.6 percent to 405 pence as it received an indicative offer from GDF Suez SA of 6 billion pounds ($9.5 billion) for the 30 percent stake it doesn’t already own.

3i Group Plc (III) rose 2.8 percent to 209.7 pence after the London-based private equity firm said it reaped 764 million pounds from asset sales in the 11 months through Feb. 29, up from 491 million pounds. Separately, Chief Executive Officer Michael Queen will step down after 25 years at the company.

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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