European Stocks Drop as ECB Pauses Greek Bank Lending
European stocks declined for a fourth day as the region’s central bank paused lending to some Greek banks and speculation mounted that Spanish banks may have their credit ratings cut at Moody’s Investors Service.
Bankia SA (BKIA) sank 14 percent after a report that depositors withdrew 1 billion euros ($1.27 billion) in the past week. Cookson Group Plc (CKSN) rose the most in six weeks after saying it’s considering a separation of its main divisions.
The Stoxx Europe 600 Index (SXXP) dropped 1.1 percent to 241.63 at the close of trading, for the longest losing streak since March 22, even as the Federal Reserve signaled further monetary easing remains an option if the U.S. economy worsens. The gauge has retreated to the lowest level since Dec. 28 on mounting concern that Greece will leave the euro area.
“If Greece falls, we’ve got big trouble in Europe and nobody knows what will happen then with Spain, with Italy, with Portugal,” said Andreas Lipkow, an equity trader at MWB Fairtrade Wertpapierhandelsbank AG in Frankfurt. “Then it doesn’t really matter if the Fed pumps more money into the market and tries to push up the U.S. economy because the trouble in Europe will overshadow everything.”
The European Central Bank said it will temporarily stop lending to some Greek banks to limit its risk. President Mario Draghi signaled the ECB won’t compromise on key principles to keep Greece in the euro area.
Moody’s Investors Service is set to downgrade the credit ratings of Spanish banks later today, said two people with knowledge of the situation, who asked not to be identified because the decision hasn’t been announced.
The nation sold the maximum amount of notes targeted at a bond auction today as borrowing costs rose and 10-year bond yields approached levels that drove Greece and Portugal into bailouts.
National benchmark indexes declined in all 10 western European markets open today. The U.K.’s FTSE 100 (UKX), Germany’s DAX and France’s CAC 40 all dropped 1.2 percent. Greece’s ASE lost 3.4 percent to the lowest level since January 1990. Exchanges in Switzerland, Norway, Sweden, Denmark, Finland, Austria, Luxembourg and Iceland were closed for the Ascension holiday.
In the U.S., a Labor Department report showed first-time claims for unemployment insurance were unchanged at 370,000 in the week ended May 12. The median forecast of 48 economists surveyed by Bloomberg called for a drop in claims to 365,000.
A separate report showed manufacturing in the Philadelphia region unexpectedly shrank in May for the first time in eight months, reflecting a drop in orders and employment.
Several members of the Federal Open Market Committee said new actions may be necessary if the economy loses momentum or “downside risks to the forecast became great enough,” according to minutes of the FOMC’s April meeting released yesterday in Washington.
Spanish lender Bankia tumbled 14 percent to 1.42 euros. The stock has dropped for 10 consecutive days, losing 42 percent. El Mundo reported that customers have withdrawn 1 billion euros since May 9, when the government said it will take over the bank.
Separately, Spanish newspaper ABC reported that Ildefonso Sanchez, Bankia’s finance director, and Miguel Angel Soria, a head of its internal audit department, will leave.
Banco Espirito Santo SA (BES) dropped 9.4 percent to 48.2 euro cents, the lowest since at least April 1993. A gauge of banking shares was the second-worst performer of the 19 industry groups in the Stoxx 600.
Investec Plc slipped 3.4 percent to 317.5 pence. The owner of a bank and money manager in South Africa and the U.K. said full-year profit dropped 41 percent after costs rose and trading income slumped.
Vedanta Resources Plc, an aluminum and copper producer in India, declined 4 percent to 985 pence, a four-month low. The company said fiscal full-year profit plunged 92 percent on higher financing costs, largely for the loan it arranged to acquire oil producer Cairn India Ltd.
TNT Express NV fell 3 percent to 8.72 euros, its lowest price in three months. PostNL NV (PNL), which owns a 30 percent stake in TNT, dropped 6.2 percent to 2.73 euros.
SBM Offshore NV (SBMO), the world’s biggest supplier of floating oil and gas platforms, fell 5 percent to 11.79. The stock was cut to underweight, the equivalent of sell, from equal weight at Barclays.
Aviva Plc (AV/) slid 4.7 percent to 267.7 pence after the U.K.’s second-biggest insurer by market value reported a 7 percent decline in first-quarter sales of life insurance and pensions to 6.52 billion pounds ($10.4 billion). That missed some analysts’ estimates.
Kesa Electricals Plc (KESA) plunged 14 percent to 46.76 pence, its lowest price since at least July 2003, according to data compiled by Bloomberg. The owner of the Darty electronics chain, said French revenue slumped in the final quarter of the fiscal year as consumers bought fewer televisions after a switchover to digital reception last year.
Cookson jumped 5.5 percent to 679 pence, the biggest increase since April 2. The world’s biggest maker of ceramic linings for metal smelters said it has started a strategic review and may split its main divisions.
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