European Stocks Sink on Greek Downgrade, U.S. Economy; BHP Falls

European, Asian Stocks Slump as Moody’s Cuts Greece
BHP Billiton Ltd. and Rio Tinto Group both declined more than 2 percent as base metal prices retreated. Photographer: Simon Dawson/Bloomberg

European stocks fell to a six-week low as Moody’s Investors Service raised Greece’s default risk to 50 percent and a bigger-than-forecast drop in U.S. factory orders fueled concern the world’s largest economy is faltering.

BHP Billiton Ltd. and Rio Tinto Group both declined more than 2 percent as metal prices retreated. Kingfisher Plc, Britain’s biggest home-improvement retailer, fell 1 percent as profit missed estimates. Alcatel-Lucent SA, France’s largest telecommunications equipment maker, retreated 3.9 percent.

The Stoxx Europe 600 Index sank 1.3 percent to 274.7 at the 4:30 p.m. close in London, the gauge’s biggest two-day drop in 11 weeks. The gauge fell 1 percent last month as investors speculated that Greece will be forced to restructure its debt. Since reaching this year’s high on Feb. 17, the gauge has declined 5.7 percent.

“The recent pattern of poor economic data is beginning to fuel speculation that the global recovery has lost momentum and could start going into reverse,” said Jonathan Sudaria, a trader at London Capital Group Holdings Plc. This is “causing traders to flee risky assets.”

The U.K.’s FTSE 100 Index lost 1.4 percent, Germany’s DAX Index slid 2 percent and France’s CAC 40 Index declined 1.9 percent. Markets in Switzerland, Austria, Luxembourg and the Nordic region were closed today for the Ascension Day holiday.

Greece’s ASE Index sank 1 percent as Moody’s downgraded the nation to Caa1 from B1, putting it on a par with Cuba, according to a report published late yesterday. The move came after policy makers considered asking investors to reinvest in new Greek debt when existing bonds mature.

European Finance Ministry

European Central Bank President Jean-Claude Trichet said governments should consider setting up a finance ministry for the 17-nation currency region as the bloc struggles to contain its sovereign-debt crisis.

“Would it be too bold, in the economic field, with a single market, a single currency and a single central bank, to envisage a ministry of finance of the union?” Trichet said in a speech today in Aachen, Germany.

A U.S. report today showed orders placed with factories fell in April by the most in almost a year as demand for aircraft waned and Japan’s earthquake restrained auto-related supplies. Bookings for manufacturers’ goods dropped 1.2 percent after a revised 3.8 percent gain in March, according to figures from the Commerce Department.

U.S. Unemployment

Stocks maintained losses today after a Labor Department report showed more Americans than forecast filed applications for unemployment benefits last week, signaling the labor market is struggling to pick up. The data comes before tomorrow’s monthly government payroll report that may show a fall in the number of people hired.

Yesterday’s slump in the Standard & Poor’s 500 Index is creating a buying opportunity for investors willing to withstand declines that may reach 10 percent, according to Blackstone Group LP’s Byron Wien. More than $578 billion has been erased from American equity markets since the S&P 500 peaked at 1,363.61 on April 29, pushing the index’s valuation to 13.3 times estimated profit for 2011 from 13.8 times.

BHP Billiton, the world’s largest mining company, retreated

2.7 percent to 2,327 pence. Rio Tinto declined 2.6 percent to 4,142.5 pence. Copper, nickel and tin fell in London for a second straight day.

Kingfisher lost 1 percent to 279.3 pence as first-quarter retail profit rose 19 percent to 174 million pounds ($284 million). That compares with the 180 million-pound average estimate of four estimates compiled by Bloomberg.

Alcatel-Lucent retreated 3.9 percent to 3.80 euros after peer Juniper Networks Inc. said weakness in the overall economy is affecting performance and that most sales for the quarter will come toward the end of the period.

Unione di Banche Italiane ScpA tumbled to the lowest since Italy’s fourth-biggest bank listed its shares, after setting the terms of a planned 1 billion-euro ($1.4 billion) rights offer. The shares fell 5.4 percent to 4.99 euros.

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