European Stocks Sink, Erasing Weekly Gain, as SEC Sues Goldman

European stocks plummeted, erasing a weekly advance for the Stoxx Europe 600 Index, as U.S. regulators sued Goldman Sachs Group Inc. for fraud and a gauge of consumer confidence unexpectedly declined.

Deutsche Bank AG fell the most in nine months, leading European financial shares 2.7 percent lower. Xstrata Plc, the world’s fourth-largest copper producer, dropped 4.4 percent as China acted to cool real-estate speculation. Air France-KLM Group slid the most in two months as a cloud of ash from an Icelandic volcano forced the cancellation of flights in northern Europe for a second day.

The Stoxx 600 plunged 1.6 percent to 267.92, the biggest drop since Feb. 25, bringing this week’s drop to 0.7 percent. The gauge had been heading for a seventh straight weekly increase until the Securities and Exchange Commission said Goldman Sachs misstated and omitted key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter.

“The Securities and Exchange Commission charging Goldman Sachs is making markets plunge right now and might be the long-awaited trigger for a correction in the short-term at least,” said Markus Steinbeis, head of equity portfolio management at the German unit of Pioneer Investments, which oversees about $221 billion globally. “The impact for the market in the longer term is difficult to define, right now the market is dealing with headlines and not with detailed analysis.”

Consumer Sentiment

The Reuters/University of Michigan preliminary U.S. consumer sentiment index fell to 69.5 in April, the lowest level in five months, indicating Americans are discouraged about the labor market. Economists had projected the sentiment index would rise to 75, according to the median of 69 economists in a Bloomberg News survey.

The Stoxx 600 has surged 5.5 percent in 2010 as the European Union agreed a $61 billion aid package to help Greece tackle the region’s biggest budget deficit and the U.S. Federal Reserve pledged to maintain record-low interest rates for an extended period to secure the economic recovery.

EU finance ministers meeting today in Madrid said Greece doesn’t have an immediate plan to trigger the rescue package even as the country’s bond yields rose to the highest since before the bailout plan was announced.

Benchmark stock indexes fell in all 18 western European markets, except Iceland. The U.K.’s FTSE 100 dropped 1.4 percent, Germany’s DAX slid 1.8 percent and France’s CAC 40 plunged 1.9 percent. Greece’s ASE Index sank 1.6 percent.

Banks Slide

Deutsche Bank sank 7.3 percent to 55.99 euros, the biggest drop since July. HSBC Holdings Plc, Europe’s largest bank, slid 2 percent to 698 pence and Santander SA, the biggest lender in Spain, retreated 2.8 percent to 10.49 euros.

Xstrata plunged 4.4 percent to 1,236.5 pence. BHP Billiton Ltd., the world’s biggest mining company, declined 3.1 percent to 2,196 pence. Basic-resources producers were the worst performers in Europe today as China increased down-payment ratios for some home purchases, saying “more forceful” steps are needed to cool speculation.

Air France slid 3.4 percent to 12.44 euros, the biggest decline since Feb. 11. Air services across Europe will be disrupted into the weekend as the cloud of volcanic ash shut airports across the U.K., Germany, France and Scandinavia. Deutsche Lufthansa AG, the region’s second-biggest airline, sank 4.1 percent to 12.74 euros and British Airways Plc fell 3.1 percent to 235 pence.

Fraport Falls

Fraport AG lost 2.7 percent to 40.34 euros. The company’s Frankfurt airport was closed this morning and will remain closed for an undetermined period, an official at Germany’s DFS air traffic control agency said.

Autonomy Corp. plummeted 6 percent to 1,740 pence after the U.K.’s second-largest software company said it expects to report first-quarter results in line with analysts’ consensus estimates.

“Autonomy’s trading update for the first quarter looks to us, at first glance, a bit disappointing,” London-based Numis Securities Ltd. analysts David Toms and Will Wallis wrote in a report. “The new news in this update feels incrementally negative to us.”

Royal Bank of Scotland Group Plc climbed 5.1 percent to 48.3 pence. The biggest U.K. government-owned bank may be profitable this year, helped by cost cutting and falling bad debts, according to an analyst at BofA Merrill Lynch Global Research.

Carrefour, SKF

Carrefour SA advanced 1.4 percent to 38.39 euros. Europe’s biggest retailer reported a 5.5 percent increase in first-quarter sales on growth in France, Asia and Latin America, and said it plans to buy back about 1.6 billion euros ($2.2 billion) in shares, its first stock repurchase since 2007.

SKF AB soared 5.8 percent to 141.60 kronor. The world’s largest maker of ball bearings reported earnings and sales for the first quarter that exceeded analysts’ estimates after the company kept costs in check and manufacturing rebounded in the car industry.

Rival Swedish industrial companies Trelleborg AB and Sandvik AB rallied 6.5 percent to 53.50 kronor and 4.7 percent to 100.80 kronor, respectively.

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