European stocks slumped for a second day, dragging the benchmark regional gauge to its lowest level since July 2009, as speculation mounted that Germany is preparing for Greece to default.
BNP Paribas (BNP) SA, Societe Generale SA and Credit Agricole SA (ACA) tumbled at least 11 percent after two people with knowledge of the matter said Moody’s Investors Service may cut the banks’ ratings because of their Greek holdings. AXA SA (CS) and ING Groep NV (INGA) lost more than 8 percent as insurers posted the second biggest losses among 19 industry groups on the Stoxx Europe 600 Index.
The Stoxx 600 lost 2.5 percent to 218.93 at the 4:30 p.m. close in London. The gauge extended last week’s 3.7 percent slide, bringing its slump from this year’s peak on Feb. 17 to 25 percent, as economic data from the U.S. and Europe trailed forecasts and Standard & Poor’s downgraded America’s AAA sovereign-debt rating.
“Major equity markets remain laced with fear and uncertainty over the lack of any resolution to the ongoing crisis,” said James Hughes, a senior market analyst at Alpari Ltd. in London.
The Stoxx 600’s slump has dragged the price-earnings ratio on the gauge to 9.1 times the estimated profits of its constituent companies, the lowest valuation since March 2009, according to data compiled by Bloomberg.
National benchmark indexes declined in all 18 western European markets. The U.K.’s FTSE 100 Index slid 1.6 percent, Germany’s DAX Index lost 2.3 percent and France’s CAC 40 Index declined 4 percent. The MSCI World (MXWO) Index extended its drop since this year’s high to 20 percent.
Germany Debates Crisis
Officials in Chancellor Angela Merkel’s government in Germany are debating how to shore up the country’s banks should Greece fail to meet the budget-cutting terms of its aid package, three coalition officials said on Sept. 9. BNP Paribas, Societe Generale and Credit Agricole may have their ratings cut by Moody’s this week because of their holdings of the Mediterranean nation’s debt, two people with knowledge of the matter said.
Prime Minister George Papandreou, vowing to avoid a default and keep Greece in the euro, approved new measures yesterday to help plug a budget gap as resistance builds at home and in Europe to extending more aid to the European Union’s most- indebted nation.
“Capital preservation is the main consideration right now,” said Fredrik Nerbrand, the head of global asset allocation at HSBC Holdings Plc in London, in a Bloomberg Television interview with Owen Thomas. “This is still an environment that is highly uncertain. Owning risk is not really top of my agenda.”
SocGen, BNP Paribas
Societe Generale (GLE) slid 11 percent to 15.57 euros. BNP Paribas tumbled 12 percent to 26.12 euros and Credit Agricole plunged 11 percent to 4.83 euros. All three lenders have tumbled at least 49 percent in the last three months.
French banks top the list of Greek creditors with $56.7 billion in overall exposure to private and public debt, according to a June report by the Basel, Switzerland-based Bank for International Settlements. Moody’s placed the three banks’ ratings on review in June to examine “the potential for inconsistency between the impact of a possible Greek default or restructuring and current rating levels,” the rating company said at the time.
A gauge of insurers posted the second biggest loss among the 19 industry groups in the Stoxx 600 after banks, retreating 4.4 percent. AXA slumped 9.7 percent to 8.48 euros and ING lost 8.6 percent to 4.49 euros.
Charter International Plc (CHTR) rallied 6.6 percent to 857 pence after Colfax Corp. (CFX)’s U.K. unit said the company agreed to buy the U.K. engineering business for about 1.53 billion pounds ($2.4 billion).
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