European Stocks Retreat on Spain Debt Concern; BBVA Shares Drop

European stocks declined, snapping the longest stretch of gains in six months, after Moody’s Investors Service put Spain’s debt rating on review for a possible downgrade.

Banco Santander SA, Spain’s largest bank, and Banco Bilbao Vizcaya Argentaria SA both fell in Madrid. Inditex SA slid 5.5 percent after the world’s largest clothing retailer reported a slowing in profit growth. Drugmakers limited declines after Novartis AG said it will take full control of Alcon Inc., ending an 11-month dispute with minority shareholders.

The Stoxx Europe 600 Index lost 0.4 percent to 276.53 at the close in London, paring an earlier drop of as much as 0.7 percent. The benchmark gauge had climbed for the previous seven days as China refrained from raising interest rates and U.S. retail data boosted confidence in the world’s largest economy.

“We’ve just had a huge boulder thrown into the water sending waves of uncertainty through the market,” said London- based David Buik, a market strategist at BGC Partners. “Spain is an enormous country, its economy is the size of Greece, Ireland and Portugal times two. We will have a bit of a mark down, but markets will regain their poise again.”

Stocks pared losses after reports showed U.S. industrial production increased more than forecast in November while manufacturing in the New York region rebounded more than estimated in December.

National benchmark indexes fell in 10 of the 18 western European markets. France’s CAC 40 fell 0.6 percent and the U.K.’s FTSE 100 dropped 0.2 percent as did Germany’s DAX.

Spain’s Rating

Spain’s IBEX 35 dropped 1.5 percent after Moody’s placed the country’s Aa1 local and foreign currency government bond ratings on review, saying Spain will need to raise about 170 billion euros in 2011.

European Union leaders are meeting tomorrow in Brussels to discuss the creation of a permanent mechanism to shore up over- indebted countries. At the Summit on Dec. 16 and 17 the group will confront investor skepticism about its readiness to stem the sovereign-debt crisis that led to bailouts for Greece and Ireland and threatens to spread.

Santander fell 2.6 percent to 8.15 euros and BBVA, Spain’s second-largest bank, lost 2 percent to 7.83 euros in Madrid as Moody’s warned that Spain’s debt may increase because of costs to recapitalize the banking industry.

“Spain’s substantial funding requirements, not only for the sovereign but also for the regional governments and the banks, make the country susceptible to further episodes of funding stress,” Kathrin Muehlbronner, an analyst at Moody’s, said in a report today.

Inditex, Hennes & Mauritz

Spain’s Inditex fell 5.5 percent to 59.00 euros as profit growth slowed in the third quarter. Net income rose 20 percent to 551 million euros ($734 million) in the three months ended Oct. 31, according to nine-month results reported today by the owner of the Zara chain. Nine-month profit increased 42 percent. The stock has surged 37 percent so far this year.

Hennes & Mauritz AB fell 2 percent to 239.50 kronor. Europe’s second-largest clothing retailer reported a 17 percent rise in November total sales, while sales at shops open at least a year rose 8 percent.

SuperGroup Plc, which owns the SuperDry clothing brand, fell the most since its initial public offering in March, losing 11 percent to 1,450 pence, as higher costs curbed its profits.

“We see this as a negative turn,” London-based Execution Noble Ltd. analyst Sanjay Vidyarthi wrote in a report today. “We had previously understood that SuperGroup expected to navigate input cost pressures relatively well as a result of its growing scale and bargaining power with suppliers.”

Aixtron

Aixtron AG, a maker of equipment used to produce LED screens, retreated 3.2 percent to 26.75 euros in Frankfurt after U.S. peer Veeco Instruments Inc. slumped 16 percent in U.S. trading yesterday. Citigroup Inc. downgraded the U.S. maker of gear for chipmakers and data storage to “hold” from “buy.”

Beiersdorf AG dropped 5.7 percent to 41.195 euros after the maker of Nivea skin-cream forecast 2011 operating earnings before interest and taxes below this year’s level as the company plans to “step up marketing spending significantly.” The company posted an investor presentation on its website today.

Novartis rallied 4.9 percent to 56.25 Swiss francs after the company agreed to pay $12.9 billion for Alcon stock it doesn’t already own. The payment will be a combination of Novartis stock and, if necessary, cash to bring the value of the bid to $168 a share. Alcon’s Independent Director Committee recommended approval.

Atos Origin

Atos Origin SA soared 13 percent to 38.36 euros after Germany’s Siemens AG late yesterday said its plans to sell its computer-services unit to Atos in an 850 million-euro ($1.14 billion) transaction.

The Munich-based company will receive a 15 percent stake in the combined entity as well as cash and a convertible bond and will contribute about 250 million euros to help the integration. Siemens’ shares gained 1.6 percent to 92.60 euros.

Capital Shopping Centres Group Plc rallied 4.9 percent to 415.6 pence after Simon Property Group Inc. made a bid for Britain’s biggest retail landlord that values the company at 2.9 billion pounds ($4.6 billion). Capital Shopping later rejected the proposal.

Hochtief AG gained 2.1 percent to 65.72 euros after Actividades de Construccion y Servicios SA raised its offer price to 9 ACS shares for every 5 shares of the German company.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.

To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net.

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