European Stocks Slide as Greeks Fail to Agree on Austerity Deal

European stocks fell from a six month-high this past week, as Greece’s coalition government failed to agree on the remaining spending cuts needed to obtain financial aid from the European Union and stave off a default.

Xstrata Plc (XTA) fell 6.6 percent as some investors opposed Glencore International Plc’s $39 billion takeover proposal. Credit Suisse Group AG (CSGN) sank 8.1 percent after posting a loss when analysts had predicted a profit. Vestas Wind Systems A/S (VWS) dropped 23 percent as the wind-turbine maker reported a full- year loss four times wider than analysts had forecast.

The Stoxx Europe 600 Index fell 1.3 percent to 261.24 this week, retreating from its highest level since July 29. The benchmark measure has still rallied 22 percent from its two-year low on Sept. 22 and 6.8 percent from the start of this year as the European Central Bank lent 489 billion euros ($645 billion) to banks and investors speculated that the currency area would contain its sovereign-debt crisis.

“If Greece comes out now and says it will no longer play along and chooses to default, that may trigger a drop in European equities,” said senior equity strategist Per Hansen at Silkeborg, Denmark-based Jyske Bank A/S. “The ECB intervention, providing a flush of liquidity in December, insulated Italy and Spain from a Greek default, so the Greeks will go down on their own and the decline will be around 5 percent.”

European stocks dropped 0.9 percent on Feb. 10 as George Karatzaferis, who heads one of the three parties supporting Prime Minister Lucas Papademos’s government, said he will not vote for the austerity measures needed to get additional rescue funds from the European Union.

Finance Ministers’ Meeting

A meeting of euro-area finance ministers on Feb. 9 ended with Luxembourg’s Prime Minister Jean-Claude Juncker saying that Greece’s politicians must enshrine the budget cuts in law, identify 325 million euros in spending reductions and promise not to backtrack on the measures following upcoming elections.

Karatzaferis spoke hours after Germany’s Finance Minister Wolfgang Schaeuble told lawmakers in Berlin that Greece had missed its deficit targets.

“What has particularly bothered me is the humiliation of the country,” Karatzaferis, whose Laos party has 16 members in the 300-seat parliament, said in televised comments. “Greece can’t and shouldn’t do without the European Union, but it could do without the German boot.”

Vote on Austerity

Greece’s Finance Minister Evangelos Venizelos said after the Brussels meeting that this weekend’s parliamentary vote to introduce the austerity measures amounted to a ballot on membership of the euro.

“The Greeks may blame their situation on foreign banks and choose to default,” Hansen said. “But banks will only suffer one or two years from a default, while the Greeks will see living standards halved and have to deal with the fallout for 15 years.”

In the U.S., a report showed that consumer confidence declined this month more than economists had forecast as rising gasoline prices began to stress household budgets. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment dropped to 72.5 in February from 75 in January. The median estimate in a Bloomberg News survey called for 74.8.

Fifteen of the 19 industry groups in the Stoxx 600 declined this past week, with mining companies dropping the most. The International Monetary Fund said the euro area’s debt crisis will cut China’s economic expansion almost in half if it worsens. Based on the IMF’s “downside” forecast for the global economy, China’s growth would drop by as much as 4 percentage points from the fund’s current projection for an expansion of 8.2 percent this year, the organization said in a report released by its China office in Beijing on Feb. 6.

Xstrata, Glencore

Xstrata (SXPP) fell 6.6 percent and Glencore dropped 9.8 percent after Glencore offered 2.8 of its shares for every Xstrata (SXPP) share, valuing the stocks Glencore does not already own at $39 billion in a deal that will create the world’s fourth-largest mining company, combining the largest supplier of coal burned by power stations with Glencore’s global trading network.

Rio Tinto Group, the world’s third-biggest miner, dropped 5.4 percent this past week after taking a $8.9 billion charge on its aluminum business, pushing the company to a second-half loss.

Credit Suisse Slides

Credit Suisse fell 8.1 percent, lead declines in bank shares as the second-biggest Swiss lender posted a loss in the fourth quarter for the first time since 2008, hurt by “adverse markets” and costs to reorganize its investment bank.

Raiffeisen Bank International AG (RBI) fell 3.9 percent. Eastern Europe’s third-biggest lender has revisited plans for a rights offering, four people with knowledge of the talks said. The company abandoned preparations for a sale last year.

Vestas plunged 23 percent for the third-largest slump on the Stoxx 600 this past week. The world’s biggest wind-turbine maker reported an annual loss of 166 million euros, according to its annual report. The average estimate of 16 analysts called for a loss of 40.3 million euros, according to data compiled by Bloomberg. Vestas attributed the loss to production delays at a new generator factory and unexpected costs developing a turbine.

Nobel Biocare Holding AG (NOBN) tumbled 24 percent as the world’s second-biggest dental implant maker reported earnings for 2011 that missed analysts’ estimates.

Alcatel-Lucent, France’s largest telecommunications- equipment supplier, jumped 13 percent after forecasting increased profit margins in 2012 and announcing a plan to increase income from its trove of 29,000 patents. The company also reported its first annual profit in six years.

National benchmark indexes declined in 13 of the 18 western-European markets this past week. France’s CAC 40 Index slipped 1.6 percent. Germany’s DAX Index dropped 1.1 percent and the U.K.’s FTSE 100 Index fell 0.8 percent.

Of the 125 Stoxx 600 companies that have reported quarterly earnings since Jan. 9, 64 have missed analysts’ estimates, compared with 56 that beat projections, according to data compiled by Bloomberg.

To contact the reporter on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net

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

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