European Stocks Decline for a Second Day on Iraq, Ukraine

European stocks dropped for a second day as Sunni insurgents made further territorial gains in Iraq and as Russia cut supplies of gas to Ukraine.

BT Group Plc slipped 2.4 following a report that the former telecommunications monopoly may have to increase payments to its company pension plan. Actelion Ltd. rallied the most since at least April 2000 after saying its experimental treatment for a lung disease met the main goal of a late-stage study.

The Stoxx Europe 600 Index declined 0.5 percent to 345.52 at the close of trading in London. The benchmark gauge slipped last week, halting eight weeks of gains, as U.S. retail sales grew more slowly than forecast and more Americans than estimated applied for unemployment benefits.

“It’s impossible for equity markets to maintain momentum when there are effectively two fronts of unrest, with Iraq and Ukraine,” said Lorne Baring, who helps oversee about $500 million as managing director at B Capital SA in Geneva. “Investors are digesting the possibility of escalating military and civil unrest in both countries. Iraq came as a surprise and we’re unable to predict what’s coming next, so this will be a period of day-by-day monitoring and trading.”

National benchmark indexes retreated in 15 of the 18 western-European market today. France’s CAC 40 slipped 0.7 percent. Germany’s DAX and the U.K.’s FTSE 100 retreated 0.3 percent each. The volume of shares changing hands in Stoxx 600 companies was 13 percent lower than the average of the last 30 days, according to data compiled by Bloomberg.

Iraq Conflict

In Iraq, Sunni insurgents stormed and captured the northern town of Tal Afar, west of Mosul, yesterday, according to Jabar Yawar, the secretary general of the Ministry of Peshmerga. The country’s army killed more than 279 militants yesterday, according to a spokesman, as the group calling itself the Islamic State in Iraq and the Levant sought to move further south toward Baghdad.

Russia’s OAO Gazprom cut off gas supplies to Ukraine after saying it hadn’t received any payments before a deadline of 10 a.m. Moscow time. The state-run energy company will continue to supply its customers in the European Union through the same pipeline. It warned the European Commission of possible risks to the transit of gas before making today’s announcement.

In the U.S., a release from the New York Federal Reserve showed that a measure of manufacturing activity in the region unexpectedly rose to 19.28 in June from 19.01 in May. Economists had forecast the index would fall to 15.

A separate Fed report showed that industrial production in the world’s largest economy advanced 0.6 percent in May, more than the 0.5 percent that economists had predicted. Output declined a revised 0.3 percent in April.

BT Retreats

BT slipped 2.4 percent to 384.9 pence after the Sunday Times reported that the former state-run company may have to pay as much as 550 million pounds ($934 million) a year into its pension plan following a review that starts next month. The valuation of the 319,000 member final-salary pension arrangement may reveal that the deficit has climbed to about 6 billion pounds from 4.1 billion pounds, according to unidentified analysts cited by the newspaper.

Telecom Italia SpA (TIT) fell 4.2 percent to 94.6 euro cents. Mediobanca SpA said it will withdraw from Telco SpA, an investment vehicle that owns 22.4 percent of Telecom Italia, according to data compiled by Bloomberg. Assicurazioni Generali SpA announced its intention to do the same last week. Intesa Sanpaolo SpA, which also holds a stake in Telco, will soon announce its support for a demerger of the investment vehicle, two people familiar with the matter said.

Mediobanca, Generali

Mediobanca dropped 1.6 percent to 7.70 euros and Generali slipped 1.3 percent to 16.29 euros. Intesa Sanpaolo retreated 1.5 percent to 2.46 euros.

Actelion jumped 15 percent to 104.50 Swiss francs. The company said that fewer sufferers of pulmonary arterial hypertension died or experienced a worsening of their condition after taking its selexipag drug in a phase-three study. Actelion tested its oral treatment in a trial of 1,156 people with the deadly and incurable artery-narrowing disease. CEO Jean-Paul Clozel said the company will apply for regulatory approval for the treatment as soon as possible.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net Will Hadfield, Srinivasan Sivabalan

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