European Stocks Decline After Greek Bailout Agreement
European stocks fell from a six- month high amid speculation a Greek bailout deal won’t be sufficient to solve the nation’s debt crisis.
CSM NV, the world’s biggest maker of bakery ingredients, tumbled 9.9 percent after reporting an unexpected loss. Segro (SGRO) Plc dropped 2.1 percent after writing down the value of peripheral assets. National Bank of Greece SA (ETE), the country’s largest lender, plunged 9.5 percent.
The Stoxx Europe 600 Index (SXXP) lost 0.5 percent to 266.78 at the close of trading. The gauge has still rallied 24 percent since Sept. 22 amid speculation that the European sovereign-debt crisis will be contained and as U.S. economic data exceeded forecasts. The measure rose for a fourth day yesterday, climbing to the highest level since July 26.
“We saw strong gains last week as the bailout was anticipated,” said Louis de Fels, a Paris-based money manager at Raymond James Asset Management International, which oversees $35 billion worldwide. “Now we will need more good economic news to push stocks higher.”
National benchmark indexes dropped in all of the western European markets, led by Greece’s ASE, which sank 3.5 percent. France’s CAC 40 fell 0.2 percent and Germany’s DAX (DAX) slid 0.6 percent. The U.K.’s FTSE 100 Index declined 0.3 percent.
European finance ministers approved a 130 billion-euro ($173 billion) bailout package for Greece early today by tapping into European Central Bank profits and convincing investors to provide more debt relief to the Mediterranean country. The deal includes a 53.5 percent writedown for investors in the nation’s debt, according to Luxembourg’s Jean-Claude Juncker, who chaired the talks. Finance ministers haggled into the night in Brussels over the terms of new loans and a possible contribution by central banks.
The odds that Greece will remain encumbered by debt were illustrated by an analysis by European and International Monetary Fund officials that highlighted what could go wrong with a country unable to grow out of its fiscal woes by devaluing its currency. In a worst-case scenario Greece’s debt might balloon to 160 percent of gross domestic product in 2020, it concluded.
Unless 90 percent of investors sign up to the bond swap, Greece may need to use force to secure the debt relief, entering legal difficulties. Finland and Germany are among the nations whose lawmakers must back the new loans and the International Monetary Fund must also decide how much it is willing to contribute to the package.
“Further hurdles remain,” Jonathan Sudaria, a trader at London Capital Group, wrote in e-mailed comments. “Concerns still linger over whether the incoming government in Athens would have any incentive or wish to enforce the austerity measures after they have received the bailout package.”
CSM (CSM) sank 9.9 percent to 13.12 euros, the largest drop in more than four months. The company posted a full-year net loss of 174 million euros, while analysts in a Bloomberg survey had predicted a profit.
Segro, the U.K.’s largest publicly traded owner of industrial properties, declined 2.1 percent to 231.7 pence. Net asset value adjusted for share options slid 9.8 percent to 340 pence a share in the second half of 2011, the Slough, England- based company said. The average analyst estimate was 354 pence, according to a report from JPMorgan Chase & Co.
National Bank of Greece led declines in financial shares, falling 9.5 percent to 2.68 euros, after three days of gains. Intesa Sanpaolo SpA dropped 2.4 percent to 1.53 euros in Milan. Deutsche Bank AG (DBK), Germany’s largest lender, fell 2.1 percent to 33.85 euros. Julius Baer Group Ltd. declined 2.5 percent to 36.66 Swiss francs.
TNT Express NV fell 2.9 percent to 9.89 euros after the express-delivery service in takeover talks with United Parcel Service Inc. reported a fourth-quarter loss as reorganization costs and losses in emerging markets mounted. Post NL, which owns almost 30 percent of TNT according to data compiled by Bloomberg, dropped 4.3 percent to 4.75 euros.
Wienerberger AG (WIE) fell 1.7 percent to 9.33 euros in Vienna after the world’s biggest brickmaker’s 2011 net income missed analyst estimates.
Tullow Oil Plc (TLW) dropped 3.6 percent to 1,543 pence, the largest decline in a month, after announcing results for an exploration well in Sierra Leone.
“While the pay encountered liquids, further appraisal is required to assess the commerciality,” Goodbody Stockbrokers said.
Colruyt SA (COLR), Belgium’s biggest discount food retailer, slipped 2.1 percent to 29.17 euros after it was cut to “conviction sell” from “neutral” at Goldman Sachs Group Inc.
Petropavlovsk Plc (POG), a miner of gold in Russia, rose 6 percent to 738.5 pence after Nomura Holdings Inc. upgraded the stock to “neutral” from “reduce.”
Croda International Plc (CRDA) gained 4.5 percent to 2,123 pence after reporting a 26 percent jump in pretax profit last year to 242.2 million pounds ($384 million), exceeding the average 239 million pounds estimated by analysts.
Banca Monte dei Paschi di Siena SpA (BMPS), Italy’s third-biggest bank, surged 8.8 percent to 39 euro cents ahead of the sale of a stake by its biggest investor.
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