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European Stocks Fall as Bundesbank Criticizes Bond Plan

European (SXXP) stocks fell as Germany’s Bundesbank criticized a European Central Bank plan to lower the region’s sovereign yields through bond purchases, highlighting the rift among policy makers over ways to end the debt crisis.

Lonmin Plc (LMI) slid 4.6 percent on reports it may raise $1 billion in a rights issue after operations at its biggest mine were halted amid deadly violence, the Sunday Times reported. Bankia (BKIA) SA fell 4.6 percent. Heineken NV (HEIA) climbed 1.6 percent after it raised its offer for Asia Pacific Breweries Ltd. Banca Monte dei Paschi di Siena SpA led gainers, jumping 5.1 percent.

The Stoxx 600 dropped 0.5 percent to 271.50 at the close of trading. European stocks advanced to their highest level since July 2011 last week, rallying for an 11th week, amid optimism policy makers will take steps to protect the region’s banks and as American consumer sentiment and leading economic indicators beat forecasts.

“The last couple of days we had a pretty good upward move so it’s quite normal that we got right now a little consolidation,” Andreas Lipkow, an equity trader at MWB Fairtrade Wertpapierhandelsbank AG in Frankfurt, said in a telephone interview. “Everybody is thinking about what the ECB will exactly do and we’ve got very important political meetings in the next couple of days, so its normal that some investors are taking some profits.”

The ECB’s governing council may decide at its next meeting in early September to set yield limits on the debt of each country, Der Spiegel reported yesterday, without saying where it got the information.

Bundesbank Criticises

Germany’s Bundesbank stepped up its criticism of the ECB’s plan to embark on potentially “unlimited” government bond purchases.

“The Bundesbank holds to the opinion that government bond purchases by the eurosystem are to be seen critically and entail significant stability risks,” the Frankfurt-based central bank said in its monthly report. The new program “could be unlimited” and decisions about potentially far greater sharing of solvency risks should be taken by governments or parliaments, not by central banks, it said.

Luxembourg Prime Minister Jean-Claude Juncker, who also heads the group of euro-area finance ministers, will discuss a request by Greek Prime Minister Antonis Samaras for a two-year extension to the indebted nation’s fiscal adjustment program when he visits Athens on Aug. 22. Samaras travels to Berlin and Paris on Aug. 24 and 25 after French President Francois Hollande and German Chancellor Angela Merkel meet in the German capital on Aug. 23.

Greek Announcements

“Later this week you’re going to have several announcements for Greece and other European countries and I would expect those announcements to provide fuel for the next move in the European markets,” said Theodore Krintas, managing director of Attica Wealth Management in Athens in a telephone interview. “If Prime Minister Samaras gets something like a conditional yes in the extension of the program I would expect the markets to celebrate because it seems that the markets are discounting the most probable outcome will be something like a conditional no.”

Europe’s leaders are returning from vacation with agreement still elusive on measures to support Greece and to prevent Spain and Italy being shut out of sovereign debt markets. Spain urged unlimited ECB support over the weekend after its 10-year bonds last week advanced for the first time this month, as Merkel signaled conditional support for the ECB’s plan to help reduce indebted countries’ borrowing costs.

Schaeuble Comments

The sovereign-debt crisis mustn’t become a “bottomless pit” for Germany, even though Europe’s biggest economy would pay the highest price in a breakup of the euro region, German Finance Minister Wolfgang Schaeuble said on Aug. 18 during his ministry’s open day in Berlin. “There are limits,” he said, as he ruled out another aid program for Greece.

National benchmark indexes fell in 16 of the 18 western European markets. U.K.’s FTSE 100 Index dropped 0.5 percent. France’s CAC 40 Index lost 0.2 percent and Germany’s DAX Index fell 0.1 percent. Greece’s ASE Index was the worst performer, falling 2 percent.

Lonmin lost 4.6 percent to 610 pence, dropping for a sixth day. The world’s third-biggest platinum miner may raise $1 billion in a rights issue as soon as next month after operations at its biggest mine were halted amid deadly violence, the Sunday Times reported, citing people close to the situation it didn’t name.

Xstrata Plc (XTA), which owns a 25 percent stake in Lonmin, has signaled that it’s ready to cover its part of the deal, the newspaper said. Xstrata fell 3.4 percent to 907.5 pence. Separately, Deutsche Bank downgraded Lonmin shares to sell from neutral.

ENRC Declines

Eurasian Natural Resources Corp. (ENRC), a producer of metals in Kazakhstan, fell 3.4 percent to 357 pence. The stock was cut to neutral from outperform at Credit Suisse Group AG. A gauge of commodity producers was the second-worst performer of the 19 industry groups on the Stoxx 600 Europe Index.

Bankia tumbled 4.6 percent to 1.40 euros, snapping four days of gains. Credit Agricole SA (ACA) dropped 4.9 percent to 4.10 euros as a gauge of bank shares led declines on the Stoxx 600.

Michael Page International Plc (MPI), a U.K. recruitment company, lost 3.2 percent to 371.1 pence. The stock was cut to sell from neutral at Goldman Sachs Group Inc.

Heineken gained 1.6 percent to 43.84 euros. The world’s third-largest brewer raised its offer for a controlling stake in Asia Pacific Breweries to S$5.6 billion ($4.5 billion) to prevent a company linked to a Thai billionaire from disrupting its takeover plans.

Monte Paschi

Banca Monte dei Paschi di Siena jumped 5.1 percent to 22.7 euro cents, paring gains of as much as 17 percent. The world’s oldest bank may become the first Italian lender since the 1990s to have the government as a shareholder as the company weighs further goodwill writedowns.

Monte Paschi, which is borrowing 3.4 billion euros ($4.2 billion) by selling bonds to the state, must give shares to the Italian Treasury in lieu of interest on the debt if it reports an annual loss, according to a law approved this month.

The volume of shares traded on Italy’s FTSE MIB Index was 67 percent more than the average of the last 30 days, according to data compiled by Bloomberg

Home Retail Group Plc (HOME), the owner of Argos stores, gained 3.6 percent to 96.3 pence. The shares were upgraded to hold from sell at Deutsche Bank.

Amlin Plc (AML) climbed 2.1 percent to 389.1 pence. The insurer reported a first-half pre-tax profit of 184.5 million pounds ($289 million) compared with a 192.3 million pound loss in the same period last year.

To contact the reporter on this story: Tom Stoukas in Athens at astoukas@bloomberg.net

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

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