European Stocks Decline on Middle East Violence, U.S. GDP

European stocks fell the most in more than two months as violence in the Middle East escalated and a report showed the U.S. economy contracted in the first quarter by the most since the depths of the last recession.

GDF Suez SA dropped 2.3 percent after France sold a 1.5 billion euros ($2 billion) stake in the nation’s largest natural-gas distributor. Aker Solutions ASA slumped 5.5 percent after saying Total SA canceled a contract for its Skandi Aker vessel. Banco Comercial Portugues SA rallied the most since September 2012 after saying it will sell shares to repay state aid earlier than planned.

The Stoxx Europe 600 Index slid 1.1 percent, the most since April 11, to 341.94 at the close of trading in London. The gauge has fallen 1.8 percent in the past four days as investors weighed developments in Iraq, while economic data showed euro-area manufacturing weakened and German business confidence dropped to the lowest level this year.

“The momentum has faded,” Gunther Westen, who helps oversee about $35 billion as head of asset allocation and fund management at Meriten Investment Management GmbH in Dusseldorf, Germany, said in a telephone interview. “We probably need more upbeat economic data. We are probably in for more range trading given the Ukraine crisis, the Iraq crisis. There’s also some profit taking.”

National benchmark indexes fell in every western-European market open today except for Portugal. Germany’s DAX lost 0.7 percent, while the U.K.’s FTSE 100 declined 0.8 percent and France’s CAC 40 sank 1.3 percent.

Higher Volume

The number of shares changing hands in Stoxx 600-listed companies was 31 percent greater than the 30-day average for this time of the day, according to data compiled by Bloomberg.

All 19 industry groups in the Stoxx 600 fell, with oil and gas companies dropping the most.

Insurgents are tightening their hold on parts of Iraq, according to U.S. officials. A small contingent of U.S. forces has arrived in Iraq to gather intelligence for possible air strikes and establish an operations center in Baghdad, Rear Admiral John Kirby, the Defense Department spokesman, told reporters in a briefing at the Pentagon.

The U.S. is preparing sanctions aimed at specific areas of the Russian economy as the Obama administration increases pressure Russia over the Ukraine crisis, according to three people briefed on the plans. The sanctions would apply to technology used to explore, produce, transport or deliver natural gas, crude and or their refined products, two of the people said.

Losses Extend

Equities extended losses after a report showed U.S. gross domestic product shrank at a 2.9 percent annualized rate in the first quarter, more than forecast and the worst reading since the same three months in 2009. Separate data showed durable-goods orders fell 1 percent in May.

In Germany, market-research company GfK AG forecast that its consumer-confidence index will rise to 8.9 in July. That would be the highest reading since December 2006. The measure has not dropped since January 2013 and climbed to 8.6 in June.

GDF Suez retreated 2.3 percent to 20.33 euros. The French government sold 3.1 percent of the company, trimming its holding to 33.6 percent, as it seeks to raise funds to purchase a stake in Alstom SA. The shares were priced at 20.18 euros each, the bottom of a proposed range, according to two people familiar with the sale.

Alstom climbed 0.7 percent to 26.97 euros. Under an agreement announced June 22, the French government will buy as much as 20 percent of Alstom (ALO) from Bouygues SA, allowing General Electric Co. to overcome a last hurdle for its $17 billion purchase of Alstom’s energy assets.

Aker Solutions

Aker Solutions slumped 5.5 percent to 106.40 kroner. Total ended the two-year, $250 million contract, according to a statement. The value of the remaining contract period was $150 million, it said.

Banca Monte dei Paschi di Siena SpA tumbled 20 percent to 1.50 euros for a third day of losses. Shares of the Italian lender stemming from its 5-billion euro capital increase are available for sale, according to terms of the offering obtained by Bloomberg.

United Internet AG sank 6.6 percent to 32.80 euros. The German online-access and domain provider didn’t reach a network agreement with Telefonica SA, spokesman Marcus Schaps said.

Bunzl Plc fell 1.8 percent to 1,600 pence. The distributor of disposable tableware and food packaging said it bought Allshoes Benelux BV in the Netherlands and JPLUS Comercio e Distribuicao Ltda in Brazil. Bunzl also reported that first-half revenue climbed 6 percent at a constant foreign-exchange rate.

New Shares

Banco Comercial Portugues rallied 14 percent to 18 euro cents. The country’s second-biggest publicly traded lender said it will issue shares to repay 1.85 billion euros of state-subscribed hybrid capital instruments. It intends to reimburse the outstanding 750 million euros by 2016, a year ahead of its schedule.

Metro AG climbed 1.5 percent to 31.67 euros, the highest price in four months. JPMorgan Chase & Co. boosted Germany’s largest retailer to neutral from underweight, meaning that it no longer recommends selling the stock. Metro may be able to start a planned initial public offering for its Russian unit in the fall amid increased investor demand for the country’s equities and a rebound in the ruble, according to JPMorgan. The firm also boosted its stock-price estimate to 32 euros from 24 euros.

Carrefour SA advanced 2 percent to 26.88 euros. France’s largest retailer remains on track to meet full-year earnings expectations, Morgan Stanley said in a note. Carrefour will buy back Distribuidora Internacional de Alimentacion SA’s French business, it said last week.

To contact the reporter on this story: Inyoung Hwang in London at ihwang7@bloomberg.net

To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net Alan Soughley

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