European stocks fell as inflation unexpectedly accelerated to the fastest pace in more than two years in March and investors speculated that the region will struggle to contain its sovereign-debt crisis.
Banks extended losses in the final minutes of trading as Irish regulators instructed the country’s four largest lenders to raise 24 billion euros ($34 billion) in capital following a series of stress tests. Hennes & Mauritz AB slumped 3.2 percent after saying first-quarter profit fell.
The benchmark Stoxx 600 slid 1 percent to 275.9 at the 4:30 p.m. close in London, halting a six-day winning streak. The gauge has advanced 5.2 percent since its lowest level this year on March 16 as investors speculated that Japan will prevent a meltdown at its damaged nuclear power plant and as the U.S., U.K. and France mounted airstrikes against troops loyal to Libya’s Muammar Qaddafi. The index rose less than 0.1 percent this quarter.
“Inflation accelerating makes it more likely that the European Central Bank will tighten monetary policies, deteriorating the environment for European equities,” said Tammo Greetfeld, senior equity strategist at UniCredit SpA in Munich. “The euro-zone debt crisis will not end any time soon.”
Inflation in the 17-nation euro area quickened to 2.6 percent in March from 2.4 percent in February, the European Union’s statistics office in Luxembourg said today in an initial estimate. That’s the fastest pace since October 2008 and exceeds the ECB’s 2 percent limit for a fourth month. Economists had forecast inflation to remain at 2.4 percent, the median of 32 estimates in a Bloomberg News survey showed.
Moody’s Investors Service said it can’t rule out further credit downgrades for euro-area nations because the EU’s March 25 agreement on a permanent bailout fund, the European Stability Mechanism, failed to go far enough.
Portugal reported a budget deficit of 8.6 percent of gross domestic product last year, missing a government target of about 7 percent and increasing the likelihood that the country will ask for an EU bailout. Portugal’s two-year government bond yield today climbed as much as 8.3 percent, topping the rate on the nation’s 10-year debt for the first time since 2006.
Stocks extended their losses in the last few minutes of trading as the Irish authorities set out how much capital its banks need to raise. Allied Irish Banks Plc, the biggest lender during the decade-long economic boom, requires 13.3 billion euros, the central bank in Dublin said today after publishing stress tests for four banks. Bank of Ireland Plc must get 5.2 billion euros, while Irish Life & Permanent Plc and EBS Building Society make up the remainder, the central bank said.
Ireland’s authorities want to show investors, its taxpayers and the rest of the euro area that the nation has plugged the holes in the banking system, whose collapse has cost 46.3 billion euros in capital.
U.K. consumer confidence stayed close to the lowest level since March 2009 this month as Britons remained reluctant to make major purchases, a report by GfK NOP Ltd. showed. The index of sentiment held at minus 28 from February and was down from minus 15 a year earlier, the London-based research group said.
National benchmark indexes fell in 16 of the 18 western European markets. France’s CAC 40 Index fell 0.9 percent. The U.K.’s FTSE 100 Index retreated 0.7 percent and Germany’s DAX Index slipped 0.2 percent.
A gauge of European banking shares dropped the most on the Stoxx 600. HSBC Holdings Plc, Europe’s biggest bank, lost 2.3 percent to 641 pence, while Banco Santander SA, Spain’s largest lender, slid 2.4 percent to 8.19 euros.
H&M sank 3.2 percent to 209.60 kronor as Europe’s second-largest clothing retailer said first-quarter net income fell to 2.62 billion kronor ($415 million) from 3.74 billion kronor a year earlier. Analysts on average had predicted profit of 2.77 billion kronor, a survey of estimates compiled by Bloomberg showed.
Dixons Retail Plc plunged 8.2 percent to 12.6 pence, the largest drop in the Stoxx 600, after Fitch Ratings revised the retailer’s outlook to negative from positive. Dixons’ shares were downgraded to “neutral” at Macquarie Research. The owner of Currys and PC World stores tumbled 18 percent yesterday after saying that full-year earnings will miss most analysts’ estimates.
Petropavlovsk Plc slumped 5.9 percent to 998 pence. Net income fell to $19.8 million in 2010 from $143.2 million in 2009, London-based Petropavlovsk said today in a statement. That missed the $50.9 million average estimate of eight analysts surveyed by Bloomberg.
STMicroelectronics NV slipped 1.9 percent to 8.79 euros as Europe’s biggest chipmaker was downgraded to “underweight” from “buy” at Banco Santander SA.
Gestevision Telecinco SA dropped 4.9 percent to 8.08 euros, the biggest decline this year, as shares of the broadcaster were cut to “underperform” from “outperform” at CA Cheuvreux.
Tate & Lyle Plc surged 3.2 percent to 577.5 pence after the maker of Lyle’s Golden Syrup said higher food-ingredient volume and improved profitability at its industrial starches unit mean it will meet analysts’ estimates in the year that ends today. The sugar maker said its operating performance was “similar to market expectations.”