European stocks sank for a second day, extending a two-month low, on increasing concern that government debt levels will stall the economic recovery.
Portugal’s PSI-20 Index dropped 1.5 percent as Moody’s Investors Service placed the country’s ratings on review for possible downgrade. Greece’s EFG Eurobank Ergasias SA and Spain’s Banco Popular Espanol SA slid more than 4 percent. Air France-KLM Group lost 5.5 percent as a cloud of volcanic ash from Iceland closed airports in the U.K. and Ireland.
The Stoxx Europe 600 Index fell 1 percent to 250.55, the lowest close since March 1. The benchmark gauge for European shares has retreated 1.3 percent this year amid speculation that a 110 billion-euro ($143 billion) rescue package for Greece will need to be extended to Spain and Portugal.
“We are being faced with a huge problem of sovereign debt in Japan, in the U.S. and in some of the biggest European governments,” said Andrew Freris, senior investment strategist for Asia at BNP Paribas Wealth Management. “What Greece did is that it took the current situation and made it into a sort of cartoon size, it exaggerated everything.”
The euro region faces the danger of further debt crises because of its delay in bailing out Greece and the failure to prepare a system to rescue other nations, former Bank of England policy maker Sushil Wadhwani said. European Central Bank council member Axel Weber said there is a threat of “grave contagion effects” from the Greek fiscal crisis.
“We’re still in a situation of high uncertainty until we reach an agreement on Greece,” said Michael Koehler, head of strategy at Landesbank Baden-Wuerttemberg in Mainz. “We’re seeing an increase in volatility.”
National benchmark indexes fell in all 18 western European markets. Portugal’s PSI-20 retreated 1.5 percent as Moody’s placed its Aa2 rating on Portugal’s debt on review for a possible downgrade. Greece’s ASE Index tumbled 3.9 percent to the lowest level since March 2009 as protests against government austerity measures left at least three people dead in Athens.
Spain’s IBEX 35 lost 2.3 percent as the extra yield investors demand to hold the country’s 10-year bonds instead of German bunds widened to the most since before the introduction of the euro in 1999.
Banco Espirito Santo SA, the biggest Portuguese bank by market value, tumbled 3 percent to 3.24 euros. Eurobank, Greece’s second-largest lender, sank 5.7 percent to 5 euros. Banco Santander SA, Spain’s biggest bank, fell 2.5 percent to 8.40 euros, while Banco Popular Espanol slumped 4.9 percent to 4.71 euros.
Air France, BA
Air France, Europe’s biggest airline, slid 5.5 percent to 10.73 euros, while British Airways Plc, the U.K.’s largest carrier, lost 3.4 percent to 209 pence.
Renewed ash plumes from Iceland’s Eyjafjallajökull volcano closed airports in Glasgow, Edinburgh, Dublin and Belfast. The cloud of debris has forced the cancellation of more than 100,000 flights across Europe since it erupted on April 14.
CGGVeritas plunged 6.7 percent to 20.56 euros after profit was all but wiped out last quarter. The world’s biggest seismic surveyor of oilfields said net income sank to $1 million in the first quarter from $71 million a year earlier. That missed the $5.9 million median estimate of seven analysts surveyed by Bloomberg.
Lafarge SA lost 4.8 percent to 50.32 euros, leading a measure of construction shares to the largest drop among 19 industry groups in the Stoxx 600. The world’s biggest cement maker reported earnings before interest, taxes, depreciation and amortization of 516 million euros, missing the 538 million euros predicted by analysts in a Bloomberg survey.
Vinci SA slid for a third straight day, losing 2.2 percent to 39.43 euros. The world’s biggest builder said first-quarter sales fell 6.8 percent to 6.59 billion euros.
Meda AB sank 12 percent to 62.25 kronor for the biggest drop in the Stoxx 600. Sweden’s second-largest health-care company said first-quarter net income fell to 362 million kronor from 385 million kronor a year earlier.
BP Plc, Europe’s second-biggest oil company, rose 2.9 percent to 565 pence, the first gain in four days. JPMorgan Cazenove said the sell-off following an oil spill from one of the company’s wells in the Gulf of Mexico was overdone.
Anheuser-Busch InBev NV climbed 2.3 percent to 36.94 euros. The world’s largest brewer reported an 11 percent increase in first-quarter profit after a marketing campaign ahead of the soccer World Cup boosted sales and market share in Brazil.
Pirelli & C. SpA, Europe’s third-largest tiremaker, gained 1.8 percent to 42.75 euro cents after announcing the separation of its real-estate unit in order to focus on the tire-making division.