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European Stocks Retreat as German Confidence Declines

June 22, 2012

European Stocks Decline Before German Business Confidence Report

The Bayer AG company logo is displayed during a press conference in Leverkusen, Germany. Photographer: Wolfgang von Brauchitsch/Bloomberg

European stocks fell for a second day as German business confidence declined to its lowest level in more than two years.

Volkswagen AG (VOW) slid 2.1 percent, Bayerische Motoren Werke AG (BMW) slipped 1.9 percent and Porsche Automobil Holding SE (PAH3) lost 1.5 percent as Handelsblatt newspaper reported rebates on new cars rose in June. Michael Page International Plc, Solvay SA and Royal Vopak (VPK) NV dropped after analysts downgraded the stocks. Bankia SA led gains among Spanish lenders.

The Stoxx Europe 600 Index fell 0.7 percent to 246.58 at the close of trade. The gauge has declined 9.5 percent from its high on March 16 on concern that Greece will have to leave the euro currency. It fell 0.5 percent yesterday as the Federal Reserve cut its U.S. growth forecast and a survey indicated China’s manufacturing industry may shrink.

“We’re going to be in an environment for the foreseeable future with extremely low growth, with low interest rates and a lot of politically driven volatility,” Lucy MacDonald, the chief investment officer for global equities at RCM Ltd., which manages about $128 billion, said in a Bloomberg Television interview.

The Stoxx 600 has still climbed 1 percent this week as Greece’s New Democracy party was able to form a coalition government after placing first in the country’s June 17 election.

National benchmark indexes declined in 13 of the 16 western-European (SXXP) markets open today. France’s CAC 40 fell 0.8 percent, the U.K.’s FTSE 100 retreated 1 percent and Germany’s DAX lost 1.3 percent. Spain’s IBEX 35 rose 1.5 percent as bank stocks advanced. Markets in Sweden and Finland were closed today for public holidays.

German Sentiment

German business confidence fell to the lowest in more than two years in June as the worsening sovereign-debt crisis clouded the economic outlook.

The Munich-based Ifo institute said today its business climate index, based on a survey of 7,000 executives, dropped for a second straight month to 105.3 from 106.9 in May. That’s the lowest reading since March 2010. Economists predicted a decline to 105.6, according to the median of 39 estimates in a Bloomberg News survey.

Spain’s banks would need as much as 62 billion euros ($78 billion) in capital to withstand a worst-case economic scenario, according to two consulting firms hired by the government to conduct stress tests on the lenders.

German Chancellor Angela Merkel traveled to Rome today for crisis talks with Italian Prime Minister Mario Monti, Spanish Prime Minister Mariano Rajoy and French President Francois Hollande.

European leaders will hold a summit during June 28-29, the 19th since Greece’s financial meltdown, to try and resolve competing visions over how to reshape the 17-nation economy.

Carmakers Drop

German automakers declined after Handelsblatt newspaper reported rebates on new cars rose to a seven-year high in June.

Volkswagen slid 2.1 percent to 121.15 euros, BMW slipped 1.9 percent to 56.47 euros and Porsche lost 1.5 percent to 40.31 euros.

Michael Page (MPI) tumbled 4.3 percent to 365.8 pence. The U.K. recruitment-services company was cut to underperform, which means investors should sell the shares, from neutral at Credit Suisse Group AG.

Chemical maker Solvay dropped 5.9 percent to 74.57 euros. The stock was cut to sell from neutral at Citigroup Inc.

Lanxess AG (LXS), the maker of synthetic rubber for Pirelli & C SpA tires, declined 4.9 percent to 49.10 euros.

A gauge of chemical stocks was the worst performer of the 19 industry groups on the Stoxx 600.

Royal Vopak

Royal Vopak, the world’s biggest oil and chemicals storage company, fell 2.5 percent to 48.57 euros, its fourth day of declines. The shares were cut to neutral from buy at Goldman Sachs Group Inc.

Bayer AG dropped 2.5 percent to 52.87 euros. Johnson & Johnson and Bayer failed to gain U.S. approval to expand the use of their blood thinner Xarelto to prevent heart attacks and strokes in patients with acute coronary syndrome.

Dutch phone company Royal KPN NV dropped 4.4 percent to 7.15 euros. ING Groep NV advised selling the shares because of their volatility.

America Movil SAB, billionaire Carlos Slim’s wireless carrier, yesterday disclosed a 21 percent stake in KPN, up from 8.7 percent the previous day. KPN earlier ended talks on a combination of its German business with a rival, a deal the company had sought to convince shareholders would provide greater value than Slim’s offer of 8 euros a share.

Miners Retreat

BHP Billiton Ltd. (BHP), the world’s biggest mining company, fell 2.7 percent to 1,770 pence, as base metal prices declined on the London Metal Exchange.

Vedanta Resources Plc lost 2.9 percent to 903.5 pence. Kazakhmys Plc (KAZ), Kazakhstan’s biggest copper producer, dropped 3 percent to 702 pence.

Holcim Ltd, (HOLN) the world’s second-largest cement maker, fell 3.2 percent to 50.75 Swiss francs. The company said its units ACC Ltd. and Ambuja Cements Ltd., which were fined about 194 million Swiss francs ($203 million) and 196 million francs respectively by India’s competition commission, will contest the allegations made against them.

Tecnicas Reunidas SA (TRE), a provider of engineering and construction services to the energy industry, fell 4.4 percent to 31.05 euros. The stock was cut to underperform from neutral at Bank of America Corp.

Bankia SA (BKIA), Spain’s third-largest lender, led advances among domestic banks, surging 5.2 percent to 97 euro cents. Banco de Sabadell SA (SAB) added 8.5 percent to 1.63 euros and Banco Santander SA gained 1.1 percent to 5.02 euros.

Banks Downgraded

Credit Suisse (CSGN) fell as much as 2.2 percent after Moody’s Investors Service cut its rating three levels to A2. The stock pared losses, falling 0.6 percent to 17.95 Swiss francs at the close.

Moody’s cut the ratings of 15 global banks, citing their “significant exposure to the volatility and risk of outsized losses inherent to capital-markets activities.”

Zurich-based UBS AG (UBSN), the other lender singled out for a potential three-level cut, was lowered two instead. London-based HSBC Holdings Plc. (HSBA) was cut by one grade instead of two. Deutsche Bank AG, BNP Paribas SA (BNP) and Credit Agricole SA (ACA) were cut two steps. Royal Bank of Scotland Group Plc and Societe Generale SA (GLE) were downgraded by one level.

To contact the reporter on this story: Tom Stoukas in Athens at astoukas@bloomberg.net

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


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