European Stocks Decline for First Week Since June

European stocks fell for the first week since June as Greece’s prime minister asked the leaders of Germany and France for a two-year reprieve from cutting government spending and Japan’s trade deficit widened.

Commodity companies and steelmakers declined, as Rio Tinto Group and ArcelorMittal each lost more than 4 percent. Kazakhmys Plc (KAZ) and Petropavlovsk Plc (POG) plunged after both companies reported a slide in first-half profit. Spanish lenders retreated. Heineken NV advanced 3.4 percent after analysts raised their recommendations on the shares.

The Stoxx Europe 600 Index (SXXP) dropped 1.8 percent to 268 this past week, snapping its longest winning streak since 2006. The benchmark measure has still advanced 15 percent from this year’s low on June 4 after a summit of euro-area policy makers agreed to ease repayment terms for Spanish banks and European Central Bank President Mario Draghi pledged to do whatever it takes to preserve the euro.

“The recent equity market weakness is a product of profit taking and the expectation that growth could be weak, but inflation will be maintained by stimulus moving forward,” said Daniel Weston, a portfolio adviser at Schroeder Equities GmbH in Munich. “Japan’s trade numbers highlighted slowing global growth, and comments from Europe and the U.S. have leaned towards further accommodative policy.”

Greece’s Bailout

Greece must implement reforms if it wants further international loans under the terms of its second bailout from the European Union, according to German Chancellor Angela Merkel. Speaking at a joint press conference with Greek Prime Minister Antonis Samaras in Berlin on Aug. 24, she said that the leaders of the 17-nation single currency will wait for a report from the troika due in September before making their decision. Samaras goes to Paris to meet with French President Francois Hollande on Aug. 25.

Merkel said on Aug. 23 that she and Hollande will maintain pressure on Greece to improve its economy. Samaras, who is pushing for more time to reduce his country’s debt, made his first official visit to Berlin since he assumed power two months ago.

German Finance Minister Wolfgang Schaeuble said on Aug. 23 that giving Greece more time to meet its debt obligations would not help the country and would increase costs for creditors. He spoke on SWR2 radio.

Draghi may wait until Germany’s Constitutional Court rules on the legality of the euro area’s permanent bailout fund before announcing the details of his planned government bond-purchase program, two central bank officials said on Aug. 24.

Bond Buying

Stocks fell after Germany’s Bundesbank said on Aug. 20 that the ECB’s proposal to buy bonds entailed “significant stability risks.” The new program could be “unlimited” and decisions that involve greater sharing of solvency risks should be taken by governments or parliaments, not by central banks, it said.

Japan had a trade deficit of 517.4 billion yen ($6.6 billion) in July, a report from the country’s Finance Ministry on Aug. 22 showed. That compared with a 60.3 billion yen surplus in June and a 270 billion yen forecast deficit in a Bloomberg News survey of 28 economists.

In the U.S., a report on Aug. 22 showed sales of existing properties rose to a 4.47 million annual pace in July from a 4.37 million pace in June. Economists surveyed by Bloomberg News had predicted an increase to 4.51 million. A release on Aug. 23 showed new house sales climbed to a 372,000 rate last month from a 359,000 pace in June. The median forecast of economists surveyed by Bloomberg had called for a 365,000 rate.

China Manufacturing

In China, a preliminary report by HSBC Holdings Plc and Markit Economics on Aug. 23 showed a reading of 47.8 for a purchasing managers’ index, compared with 49.3 in July, signaling manufacturing may contract at a faster pace in August.

National benchmark indexes fell in all of the 18 western European markets except Greece this week. The U.K.’s FTSE 100 slipped 1.3 percent, while Germany’s DAX Index retreated 1 percent. France’s CAC 40 dropped 1.6 percent.

An index of mining stocks was among the worst-performing industry groups on the Stoxx 600 this week. Rio Tinto lost 4.2 percent and ArcelorMittal declined 5.8 percent.

Kazakhmys plunged 11 percent after saying on Aug. 23 that first-half profit slumped 67 percent to $121 million.

Petropavlovsk tumbled 19 percent after reporting on Aug. 23 a 90 percent decline in first-half net income to $11 million because of interest payments and depreciation costs.

Spanish Banks

Banco Santander SA, Spain’s largest lender, dropped 2.9 percent as yields on the country’s benchmark 10-year bonds climbed 21 basis points over the last three days. Banco Bilbao Vizcaya Argentaria SA tumbled 5.2 percent and Bankia SA plunged 14 percent.

Telekom Austria AG (TKA) slid 9.7 percent as analysts at Goldman Sachs Group Inc. and Berenberg Bank AG cut their rating on the shares to sell from hold on Aug. 22. At least 10 brokerages have lowered their price estimates or recommendations on the shares since the Vienna-based phone company reduced its forecast for full-year profit and revenue on Aug. 16.

Heineken (HEIA) gained 3.4 percent as analysts at Bank of America Corp. and Societe Generale SA advised investors to buy the shares. The Dutch brewer said on Aug. 22 that full-year profit before exceptional items and amortization, and excluding acquisitions and currency changes, will be “broadly in line” with the 1.58 billion euros ($2 billion) reported in 2011.

Diageo Plc (DGE) advanced 1.6 percent after the world’s biggest distiller said on Aug. 23 that full-year earnings before interest and taxes, excluding some items, rose to 3.2 billion pounds ($5.1 billion) from 2.9 billion pounds a year earlier. On a so-called organic basis, earnings increased 9 percent, beating the median analyst estimate of 8.6 percent in a Bloomberg survey.

To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net

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

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