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European Stocks Retreat; Barclays, Basic-Resource Shares Drop

Jose Manuel Barroso, president of the European Commission
Jose Manuel Barroso, president of the European Commission, speaks in Tokyo last week. Photographer: Tomohiro Ohsumi/Bloomberg

European stocks fell as a decline in Barclays Plc and a sell-off in basic-resource shares overshadowed optimism that a bailout for Greece is imminent.

Barclays sank after saying first-quarter investment banking revenue dropped more than analysts estimated. Xstrata Plc and Rio Tinto Group fell on concern that a possible increase in Australian mining taxes may hurt profits. GKN Plc dropped as UBS AG cut its recommendation on the stock. National Bank of Greece SA rose for a third day in Athens after European Commission President Jose Barroso said he is confident a rescue package for the country will be completed “in days.”

The benchmark Stoxx Europe 600 Index lost 0.7 percent to 259.91, extending its monthly decline to 1.4 percent. The gauge has still rallied 64 percent from a 12-year low reached in March 2009 amid signs the global economy is recovering from the worst recession since World War II.

“Today we have not had the outstanding company numbers we had in recent days, so that has taken the shine off slightly from equities.” said Fernando Espinosa, a money manager at Interbrokers Espanola de Valores in Barcelona. “It would seem that Greece is nearing something close to a real aid package, but we still need to see that.”

National benchmark indexes fell in 10 out of 18 western European markets. Germany’s DAX lost 0.2 percent, France’s CAC lost 0.6 percent and the U.K.’s FTSE 100 decreased 1.2 percent. In Greece, the benchmark index soared 2.2 percent.

Barclays, the U.K.’s third-largest bank by assets, lost 6.4 percent to 338.25 pence. Revenue at the Barclays Capital unit slumped 26 percent to 3.8 billion pounds ($5.8 billion) for the three months to March 31, missing the 4.9 billion-pound forecast of analyst Mark Phin at Keefe, Bruyette & Woods Ltd. The shares declined the most since Feb. 4.


“Concerns regarding a slowing in the pace of improvement for the group’s investment banking operations have hit the shares,” said Keith Bowman, a London-based equity analyst at Hargreaves Lansdown. “As with the wider sector, the massive question of regulation is still very much up in the air.”

The cumulative impact of the regulatory changes could shave 2 percentage points off U.K. gross domestic product, tipping the economy back into recession, Sky News said today. Governments are stepping up regulation of banks, forcing them to curb riskier activities such as proprietary trading and to hold more capital to avoid a repeat of the credit crisis.

Xstrata fell 4.1 percent to 1,086.5 pence, while Rio Tinto, the third-largest mine operator, slid 4.4 percent to 3,379 pence. BHP Billiton Ltd., the world’s largest mining company, slumped 3.1 percent to 2,025.5 pence. Australia, the biggest iron ore and coal exporter, may introduce a 40 percent tax on mining profits, which would make it the world’s most highly taxed mining country, Citigroup Inc. wrote in an April 27 report. Treasury Secretary Ken Henry’s review of the tax system will be released on May 2.

‘Higher Taxes’

“People expect higher taxes for mining companies out of Sunday’s report,” said Wilhelm Schroeder, a Munich-based portfolio manager at Schroeder Equities GmbH, which manages about $90 million. “It will certainly happen to some degree as those companies have extraordinary earnings. The market is reacting to that today as the public wants to see a higher share of the profits.”

Petroleum Geo-Services ASA slumped 8.5 percent to 82.3 kroner. The world’s third-biggest surveyor of oil and natural-gas fields said first-quarter net income fell to $16.2 million, from $54.2 million a year earlier. That compares with a $31 million average estimate of 12 analysts surveyed by Bloomberg.

GKN declined 5.7 percent to 137 pence as the U.K. maker of aircraft components for Airbus SAS was cut to “neutral” from “buy” at UBS.

National Bank of Greece

National Bank of Greece rose 2.9 percent to 12.35 euros, having jumped more than 20 percent in the past three days. Barroso’s comments eased investor concern that the nation may default as Prime Minister George Papandreou started his sales pitch to the Greek people as unions denounced “unjust” budget cuts linked to a potential $159 billion European Union-led bailout.

“Politicians know there is a confidence issue,” said Philipp Musil, a fund manager at Semper Constantia Privatbank AG in Vienna. “They will make big decisions to give the market its confidence back.”


Michelin & Cie. rose 2.6 percent to 54.87 euros as the world’s second-biggest tiremaker said first-quarter revenue rose 12 percent, led by a rebound in sales to truckmakers in Latin America and Asia and to logistics companies. Sales advanced to 3.94 billion euros from 3.5 billion euros a year earlier, Michelin said. It forecast a 10 percent full-year volume gain as developed economies join the recovery.

Of the companies on the Stoxx 600 that have reported earnings since April 12, about 73 percent have beaten analysts’ estimates, according to data compiled by Bloomberg. In the U.S., almost 80 percent of S&P 500 companies have topped projections.

The U.S. economy expanded at a 3.2 percent annual rate in the first quarter as households spent more freely, setting the stage for gains in employment that may help the recovery broaden and accelerate. The increase in gross domestic product was in line with the median estimate of economists surveyed by Bloomberg News and capped the biggest six-month gain since 2003, figures from the Commerce Department showed today in Washington.

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