European stocks retreated, paring the Stoxx Europe 600 Index’s biggest weekly gain in four months, after German exports slumped more than forecast and Fitch Ratings cut Spain’s credit rating.
BHP Billiton Ltd. (BLT) led mining shares lower as Bank of America Corp. cut its profit estimates and base metals tumbled. Lamprell Plc (LAM) plunged 22 percent after revising its previous earnings forecast. Hennes & Mauritz AB (HMB), Europe’s second-largest clothing retailer, fell after Societe Generale SA advised investors to sell the shares.
The Stoxx 600 fell 0.3 percent to 241.93 at the close of trade. The gauge has still climbed 2.9 percent this week, the biggest advance since Feb. 3, as China cut interest rates and speculation increased that global policy makers will take steps to revive growth.
Fitch’s downgrade of Spain “should have been expected,” said Guillaume Chaloin, a fund manager at Meeschaert Asset Management in Paris, which oversees $2.5 billion in assets. “Investors are waking up after putting too much hope in central banks. We forgot that there are a lot of problems and nothing has changed. Contagion can occur. We’re seeing this in Germany with exports starting to deteriorate.”
German exports declined in April for the first time this year as Europe’s worsening debt crisis and weaker global growth curbed demand.
Exports, adjusted for work days and seasonal changes, fell 1.7 percent from March, when they gained 0.8 percent, the Federal Statistics Office said today. Economists forecast a drop of 0.7 percent, according to the median of 14 estimates in a Bloomberg News survey. Imports plunged 4.8 percent.
Fitch cut Spain’s rating to within two notches from junk, citing the cost of recapitalizing the country’s banking industry and a lengthening recession.
Spain, which saw its rating lowered from A to BBB, may need as much as 100 billion euros ($125 billion) to bolster its banking system, compared with an earlier estimate of about 30 billion euros, Fitch said yesterday after the stock market closed. The Spanish economy is set to remain in recession through 2013, the ratings company said, having previously forecast a recovery for next year.
Spain could become the fourth of the 17 euro-area countries to require emergency assistance as the currency bloc’s finance chiefs plan weekend talks on a potential aid request to shore up the nation’s lenders.
A bid for help may come as soon as tomorrow when euro finance ministers hold a conference call, said a German government official and a European Union aide, each of whom declined to be identified because the matter is confidential.
China Borrowing Costs
After a June 5 interest-rate cut by Australia, China yesterday unveiled its first reduction in borrowing costs in more than three years. European Central Bank President Mario Draghi left the door open at a June 6 press conference to a rate cut, while highlighting the limitations of the ECB’s tools in countering the region’s financial turmoil.
National benchmark indexes fell in 10 of the 18 western European markets. France’s CAC 40 slid 0.6 percent. Germany’s DAX and the U.K.’s FTSE 100 each lost 0.2 percent.
BHP, the world’s largest mining company, fell 2.9 percent to 1,767 pence. BofA-Merrill cut its earning per share estimate for the company by 5.9 percent for full-year 2013 and by 1.8 percent for 2014 on lower oil-price estimates, analyst Peter O’Connor wrote, while holding a neutral rating.
Basic-resource shares lost 2.8 percent for the biggest decline among industry groups in the Stoxx 600 as metals prices fell in London. Vedanta Resources Plc (VED) retreated 5.1 percent to 935.5 pence. Eramet (ERA) dropped 2.5 percent to 86.36 euros.
Lamprell plunged 22 percent to 84.50 pence, paring earlier losses of as much as 37 percent. The U.K. oil and gas rig engineer cut its earnings forecast for the second time in three weeks, saying it expects a first-half loss of $15 million to $20 million.
H&M declined 0.6 percent to 214.30 kronor. The shares earlier fell as much as 4.1 percent after Societe Generale cut its recommendation on the stock to sell from hold, with a share price estimate of 197 kronor.
Havas SA, a French advertising company, slid 4.2 percent to 4.10 euros. The stock was cut to equalweight from overweight at Barclays Plc, which said it has the largest exposure to Europe and the lowest to the digital sector among advertising agencies.
Novo Nordisk A/S (NOVOB) slid 2.6 percent to 783 kroner after the U.S. Food and Drug Administration extended the review of its experimental degludec insulin product by three months.
Safran SA (SAF) lost 2.7 percent to 27 euros. The company is considering producing turboprop engines, Les Echos reported, citing Pierre Fabre, head of the group’s Snecma engine unit.
Celesio AG (CLS1) advanced 5.6 percent to 11.61 euros. Europe’s largest drug wholesaler was raised to outperform, the equivalent of a buy recommendation, from underperform at CA Cheuvreux.
Nokia Oyj (NOK1V) climbed 6 percent to 2.36 euros, after earlier rising as much as 11 percent, as investors speculated the company may receive a takeover bid.
Doug Dawson, a Nokia spokesman, declined to comment on the share-price movement or any speculation regarding mergers and acquisitions.
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