European Stocks Fall for Second Day Amid Stimulus Debate

Photographer: Ralph Orlowski/Bloomberg

A trader speaks on a mobile handset near a monitor displaying index curves for the DAX, left, MDAX, centre, and Deutsche Borse AG at the Frankfurt Stock Exchange in Frankfurt. Close

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Photographer: Ralph Orlowski/Bloomberg

A trader speaks on a mobile handset near a monitor displaying index curves for the DAX, left, MDAX, centre, and Deutsche Borse AG at the Frankfurt Stock Exchange in Frankfurt.

European stocks fell, posting their first weekly decline in more than a month, as speculation that central banks will reduce stimulus measures overshadowed a bigger-than-forecast increase in U.S. durable-goods orders.

Raiffeisen Bank International AG (RBI) dropped 2.1 percent after its chief executive officer offered to quit. Next Plc retreated 2.4 percent as Morgan Stanley lowered its rating of the shares. Telecom Italia SpA lost 3.4 percent after delaying a decision to spin off its fixed-line network. International Consolidated Airlines Group SA slid 2 percent after its British Airways unit suspended short-haul services from London’s Heathrow.

The Stoxx Europe 600 Index slipped 0.2 percent to 303.35 at the close in London. The gauge lost 1.7 percent this week, the first weekly decline since April 19, as the Federal Reserve signaled it will scale back stimulus if the economy improves.

“The past two days show how sentiment has shifted as people realize markets are inflated and close to bubble territory rather than following the real economy,” Hugo Fontinha, an investment manager at State Street Global Advisors, said by phone. “It will be a great concern when the Fed tapers its quantitative easing policy and will definitely give a shock to the markets, though that may still be a while away.”

U.S. Economy

U.S. orders for durable goods climbed 3.3 percent in April after falling by the most in seven months in March, figures from the Commerce Department showed. Economists in a Bloomberg survey had estimated a 1.5 percent gain.

In Germany, business confidence increased for the first time in three months. The Ifo institute’s business climate index, based on a survey of 7,000 executives, advanced to 105.7 in May from 104.4 in April. Economists in a Bloomberg survey predicted sentiment to remain unchanged.

“Economic data is generally moving in the right direction, and the key markers of economic health in the U.S. are still showing signs of life,” said Chris Ford, who helps oversee about $150 billion as co-head of global equities at Pictet Asset Management in London. “Stocks are no longer screamingly cheap, but there’s nothing to suggest the market can’t trade at these levels or indeed move higher from here.”

National benchmark indexes declined in 12 of the 18 western-European markets. The U.K.’s FTSE 100 lost 0.6 percent and France’s CAC 40 slipped 0.3 percent, while Germany’s DAX decreased 0.6 percent.

Raiffeisen CEO

Raiffeisen Bank International lost 2.1 percent to 26.43 euros. Herbert Stepic offered to resign as the CEO of the Vienna-based lender, a day after officials began a probe into his investments through offshore accounts.

Next Plc (NXT) dropped 2.4 percent to 4,580 pence. Morgan Stanley cut the U.K. retailer to underweight, a recommendation similar to sell, saying the stock is expensive. Next jumped this week to its highest price since at least 1988 and has rallied 24 percent this year.

Telecom Italia SpA lost 3.4 percent to 62.9 euro cents as the company delayed a decision over a proposed spinoff of its fixed-line network. Its board of directors, after a meeting in Rome yesterday, will gather on May 30 to take a final call on the plan, Milan-based Telecom Italia said.

HSBC slid 2.1 percent to 726 pence, contributing the most to a decline in the Bloomberg European 500 Index. (BE500) The Telegraph reported, without citing anyone, that the lender’s $1.9 billion settlement with the U.S. government in a money-laundering case may be rejected by a judge. HSBC said in a statement it is actively supporting steps taken by regulators.

Flight Cancellation

IAG dropped 2 percent to 273 pence in London. BA canceled all short-haul flights in London through to 4 p.m. today as Heathrow airport temporarily closed its two runways after an engine fault on a BA jetliner.

SAP AG slipped 3.2 percent to 58.68 euros after saying its chief of cloud computing is leaving as part of the company’s changes to management. Lars Dalgaard, who is also founder of SuccessFactors Inc., a software provider it bought last year, is stepping down effective June 1 to become an investor, SAP said in a statement.

A gauge of technology companies was the worst performer among 19 industry groups in the Stoxx 600. STMicroelectronics NV retreated 1.6 percent to 7.19 euros and Software AG lost 1.3 percent to 26.13 euros.

Smiths Group Plc advanced 1.5 percent to 1,355 pence after saying it expects higher second-half sales compared with a year earlier, driven by an increase in orders. So-called underlying revenue increased in all of its divisions in the first nine months of the year, the maker of airport-security scanners said.

Shares of National Bank of Greece SA were suspended today to allow for a reverse share split to take effect. The lender said in a statement yesterday trading will resume on May 30.

To contact the reporter on this story: Sofia Horta e Costa in London at shortaecosta@bloomberg.net

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

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