Bloomberg News

European Stocks Fall as U.S. Budget Negotiations Continue

December 28, 2012

European Stocks Are Little Changed as U.S. Budget Talks Resume

A visitor looks at stock price information displayed on a screen inside the Madrid Stock Exchange in Madrid. Photographer: Angel Navarrete/Bloomberg

European stocks fell to the lowest level in three weeks amid concern U.S. lawmakers will fail to reach a budget agreement by the year-end deadline to avoid automatic tax increases and spending cuts in 2013.

Vinci SA (DG) dropped 2.3 percent after agreeing to buy airport operator ANA-Aeroportos de Portugal SA. Bankia SA slumped 27 percent as the stock will be excluded from Spain’s IBEX 35 Index from Jan. 2. Atari SA (ATA) tumbled 7.4 percent after forecasting a loss for the current fiscal year. Porsche SE rallied to a 23- month high after a U.S. appeals court dismissed a law suit against the company.

The Stoxx Europe 600 Index slipped 0.7 percent to 278.78 at the close of trading. With one trading day to go before the end of 2012, the gauge has advanced 14 percent this year as the European Central Bank and the Federal Reserve expanded asset purchases.

“Time is running out for the long-awaited solution in fiscal-cliff negotiations,” said Kai Fachinger, who helps oversee about $700 million as portfolio manager at SAM Sustainable Asset Management AG in Zurich. “As the positions of the two parties are just too far off, it’s likely to happen in the very last second. In a worst-case scenario, the negotiations will continue into early 2013 and stock markets will open very volatile into the new year.”

The volume of shares changing hands on the Stoxx 600 shares was 36 percent lower than the 30-day average, according to data compiled by Bloomberg. Today was the final trading day of the year for Germany, Switzerland, Italy, Denmark, Finland, Norway, Sweden and Austria.

Stocks briefly pared losses as U.S. President Barack Obama was said to plan to offer a scaled-back budget package at a meeting with lawmakers today, according to an unidentified Democratic aide.

Deadline Nearing

Obama summoned Republican and Democratic leaders to a White House meeting three days before a year-end deadline to avoid the so-called fiscal cliff of $600 billion in spending cuts and tax increases.

Obama, who had been negotiating one-on-one with House Speaker John Boehner, will meet today with Republicans Boehner and Senate Minority Leader Mitch McConnell, and Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi, both Democrats. The meeting will be held at 3 p.m. Washington time.

The president returned early from his holiday in Hawaii yesterday as lawmakers disputed which party would be responsible for missing the deadline for a debt deal, a failure that could hurt the U.S. credit rating and cause a recession.

Separately, the House will hold an unusual Sunday session on the evening of Dec. 30.

National benchmark indexes declined in all of the 18 western European (SXXP) markets except in Iceland. France’s CAC 40 slumped 1.5 percent, while the U.K.’s FTSE 100 fell 0.5 percent. Germany’s DAX slipped 0.6 percent.

Vinci, Bankia

Vinci dropped 2.3 percent, the most in three months, to 35.70 euros after Europe’s biggest builder agreed to buy Portugal’s state-owned airport operator ANA for 3.08 billion euros. Vinci’s offer was the highest out of the four binding bids that the government received for ANA.

Bankia slumped 27 percent to 40.4 euro cents, the biggest decline and the lowest price since it sold shares to the public in July 2011. The stock will be excluded from the Spanish benchmark IBEX 35 from Jan. 2. Bankia (BKIA) shares tumbled the most in a month yesterday after Spain said the lender had a negative value of 4.15 billion euros ($5.5 billion).

KBC Groep NV, Belgium’s biggest bank and insurer by market value, fell 1.8 percent to 25.75 euros after it agreed to sell its stake in Nova Ljubljanska Banka d.d. to the Republic of Slovenia, while missing a European Union deadline for other disposals.

Bank Shares

A gauge of European lenders contributed the most to the Stoxx 600’s drop, with Banco Santander SA (SAN) and BNP Paribas SA (BNP) declining 1.5 percent to 6.01 euros and 2.5 percent to 42.34 euros, respectively.

Atari retreated 7.4 percent to 88 euro cents, the biggest drop since Oct. 29, after the video-game maker said it sees a “significant” fiscal-year loss. Atari also forecast that its second-half operating loss will exceed its loss in the first half and said that it is looking at all additional means of raising or preserving cash.

Porsche (PAH3) jumped 6.3 percent to 61.70 euros, the highest price since Jan. 18, 2011, after a U.S. appeals court dismissed a lawsuit by hedge funds that accused the German carmaker of concealing a plan to corner the market in Volkswagen AG shares. The plaintiffs had sought more than $1 billion in damages.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

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


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