European Stocks Fall to Six-Week Low on Debt Concern, Korea
European stocks fell to a six-week low, extending a global selloff, as concern escalated that the region’s debt crisis will spread and North Korea fired artillery shells into South Korea.
Bank of Ireland Plc plunged 25 percent as Prime Minister Brian Cowen said he will seek national elections early next year. Banco Bilbao Vizcaya Argentaria SA dropped 3.9 percent as the cost of insuring Spanish and Portuguese subordinated bank bonds surged. Antofagasta Plc lost 4.2 percent as metals fell.
The Stoxx Europe 600 Index dropped 1.5 percent to 263.62 at the 4:30 p.m. close in London, extending yesterday’s 0.7 percent decline after Ireland’s request for a bailout failed to convince investors that the region has contained its debt crisis. The Euro Stoxx 50 Index, a benchmark for the euro area, tumbled 2.6 percent to 2,739.37, the biggest drop since Aug. 11.
It’s not “surprising that the market should be playing the domino game and probably shooting for the next most vulnerable member of the euro zone,” said Andreas Utermann, chief investment officer at the RCM unit of Allianz Global Investors on Bloomberg Television. “The Irish government’s troubles now demonstrate quite clearly that there is a lot of political risk involved.”
National benchmark indexes declined in all 18 western European markets today with gauges in Ireland, Spain, Portugal and Italy tumbling more than 2 percent. Credit-default swap contracts on Irish government bonds surged 25.5 basis points to 551, according to data provider CMA in London. The cost of insuring corporate debt also climbed to a record.
North Korea lobbed artillery shells at a South Korean island near the border, killing two soldiers and setting houses ablaze. South Korea returned fire with 80 shells and scrambled fighter jets as President Lee Myung Bak vowed to respond.
Bank of Ireland sank 25 percent to 29.2 euro cents in Dublin as the government said it will seek national elections early next year after it passes the 2011 budget. The announcement came hours after the Green Party said it will pull out of the ruling coalition following the budget vote, saying Cowen misled voters in negotiating the bailout.
“Political risks now start to come to the forefront,” said Utermann on Bloomberg Television’s “On the Move” with Francine Lacqua. “If new elections come to pass which bring parties to power that don’t agree with the previous policies, that introduces another, even bigger risk into the market.”
BBVA, Spain’s second-biggest bank, dropped 3.9 percent to 7.63 euros as traders of credit-default swaps turned their focus to southern Europe. Banco Santander SA declined 4.7 percent to 7.80 euros and Portugal’s Banco Espirito Santo SA lost 3.5 percent to 3.03 euros.
Swaps on Banco Espirito rose to a record, while contracts on BBVA climbed to the highest level in more than four months. The benchmark gauge of European sovereign risk also jumped to an all-time high.
Barclays Plc lost 2.1 percent to 264.25 pence as the U.S. Securities and Exchange Commission said the bank may have violated securities laws when it received two transfers totaling about $1.3 billion from Lehman Brothers Holdings Inc. in September 2008.
Antofagasta, the owner of copper mines in Chile, declined 4.2 percent to 1,317 pence as copper, zinc and aluminum retreated on the London Metal Exchange. BHP Billiton Ltd. fell 2.2 percent to 2,268 pence and Rio Tinto Group declined 2.8 percent to 4,070 pence.
Sky Deutschland AG sank 5.9 percent to 1.47 euros after the nation’s regulator found mistakes in the company’s financial statements regarding profit, credit risks and subscriber counts.
BaFin’s findings in the annual 2007 and first-half 2008 statements, if conclusive, may lead to corrected financial reports, fines and claims for damages, the company said yesterday in a statement. Sky Deutschland called the claims “inapplicable” and said they will be legally reviewed.
Marine Harvest ASA tumbled 11 percent to 5.74 kroner after its largest shareholder, Geveran Trading Co. Ltd., sold 250 million shares in the world’s largest salmon farmer. Geveran, which is indirectly controlled by trusts established by billionaire John Fredriksen for the benefit of his family, reduced its stake to about 23 percent.
Mitchells & Butlers lost 2.6 percent to 344.6 pence after the U.K. owner of the All Bar One Chain reported a full-year net loss of 84 million pounds ($133.8 million) and declined to pay a dividend.
Sonova Holding AG fell 7 percent to 124.4 Swiss francs. The company said it will recall the HiRes 90k cochlear implant after two instances in which the product malfunctioned led to “severe pain.”
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