Bloomberg News

European Stocks Decline as Cyprus Optimism Wanes

March 25, 2013

European stocks declined as a report sparked concern a rescue plan for Cyprus that involves shrinking its banking system may set a precedent for other euro- area lenders.

Italian banks paced losses, with Intesa Sanpaolo SpA, Banco Popolare SC and UniCredit SpA dropping more than 5.5 percent each. Meyer Burger Technology AG (MBTN) fell 5 percent on a new share- sale plan. Vodafone Group Plc added 2 percent after a report said the carrier may sell its stake in its joint venture with Verizon Communications Inc. for $135 billion.

The Stoxx Europe 600 Index (SXXP) slid 0.3 percent to 293.25 at the close of trading, after rising as much as 1 percent and falling as much as 0.5 percent. The index has still gained 4.9 percent so far this year.

“An agreement to bail out Cyprus has averted the closest brush yet with a euro-zone breakup,” Norman Villamin, who helps oversee about $44 billion as European chief investment officer at Coutts & Co., wrote in a post. “But lack of economic growth and lack of progress on a more broad-based recapitalization and banking resolution remain major issues that leave the euro zone vulnerable to renewed stress.”

The number of shares trading hands on Stoxx 600-listed companies was 21 percent greater than the average of the past 30 days, according to data compiled by Bloomberg.

Cyprus Deal

Cyprus won a 10 billion-euro ($13 billion) international bailout after agreeing late yesterday to shrink its banking system, instead of a previous demand to impose a levy on all bank accounts.

Stocks pared gains after a Reuters report citing Dutch Finance Minister Jeroen Dijsselbloem fueled concern the conditions of the bailout may set a precedent for other euro- area lenders.

“Strengthen your banks, fix your balance sheets and realize that if a bank gets in trouble, the response will no longer automatically be that we’ll come and take away your problem,” Reuters cited Dijsselbloem as saying. “We’re going to push them back.”

President Nicos Anastasiades agreed to shut down Cyprus Popular Bank Pcl, the country’s second-largest lender. The Bank of Cyprus Plc will take over the viable assets of the failed lender, along with 9 billion euros in emergency loans, according to three European Union officials familiar with the matter.

Deposit Losses

The revised accord spares bank accounts with less than the insured limit of 100,000 euros. A loss of no more than 40 percent will be imposed on uninsured depositors at the Bank of Cyprus, two EU officials said. Uninsured depositors at Cyprus Popular Bank may largely be wiped out, two other officials said.

National benchmark indexes fell in 13 of the 17 western European markets open today. The U.K.’s FTSE 100 Index (UKX) lost 0.2 percent, while Italy’s FTSE MIB slipped 2.5 percent and France’s CAC 40 Index slid 1.1 percent. Germany’s DAX retreated 0.5 percent. Stock markets in Greece and Cyprus remained closed.

Italian lenders were among the biggest decliners on the Stoxx 600 and trading in them was briefly halted in Milan. Intesa Sanpaolo dropped 6.2 percent to 1.15 euros, while Banco Popolare lost 5.9 percent to 1.01 euros. UniCredit, the nation’s biggest bank, declined 5.8 percent to 3.37 euros, its lowest price in four months.

Meyer Burger

Meyer Burger dropped 5 percent to 6.66 Swiss francs after saying it will raise 150 million francs ($158 million) by selling new stock to existing shareholders. The supplier of machinery to solar-panel makers reported a full-year net loss of 2.33 francs per share.

Remy Cointreau SA declined 2.5 percent to 89.58 euros after Nomura Holdings Inc. lowered its recommendation on the maker of Remy Martin cognac to reduce from neutral, citing a demand slowdown in China.

Vodafone rose 2 percent to 187.2 pence. The Sunday Times reported that Europe’s largest mobile-phone operator held talks with Verizon to sell its stake in Verizon Wireless for $135 billion. The paper cited unnamed people familiar with the matter.

Metso Oyj (MEO1V) surged 9.6 percent to 33.75 euros, the biggest increase since July 26. The Finnish maker of rock crushers is studying the possibility of separating its pulp, paper and power businesses into a new company that would be listed in Helsinki, according to a statement.

CSM NV rallied 6.4 percent to 17.52 euros, the biggest jump since May, after agreeing to sell its bakery-supplies unit to Rhone Capital LLC for an enterprise value of about 1.05 billion euros. The Dutch maker of bakery supplies and lactic acids, which put up the unit for sale in May, said it expects net cash of about 850 million euros from the deal.

Daily Mail & General Trust Plc increased 2.6 percent to 705 pence after the newspaper publisher left its revenue projection for the year unchanged and said it will continue a share buyback program.

To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net

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


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