European Stock Fall Before Summit As Soros Warns on Euro

European Stocks Decline for Third Day Before EU Leaders Meeting
A visitor passes a red stock index curve displayed on an electronic screen at the Hellenic stock exchange in Athens. Photographer: Chris Ratcliffe/Bloomberg

European stocks fell for a third day on concern that a summit of the region’s leaders this week will not lead to decisive measures to contain its debt crisis as Germany’s Angela Merkel hardened her resistance to debt sharing.

Unicredit SpA and BNP Paribas SA led a selloff in banks, both falling at least 5 percent. Nokia Oyj lost 11 percent amid speculation Samsung Electronics Co.’s earnings may miss some analyst estimates. Shire Plc slumped 11 percent after regulators approved a generic version of its second-biggest selling drug.

The Stoxx Europe 600 Index retreated 1.5 percent to 242.82 at the close of trade, extending its decline in the last three days to 2.7 percent and erasing the gauge’s advance for the year. The volume of shares changing hands in companies listed on the gauge was 4.6 percent lower today than the average of the last 30 days, according to data compiled by Bloomberg.

“European leaders have to give a convincing message to the people that they’re still in control of the process, but the reality is they’re increasingly running out of options short of a more closely integrated fiscal union,” Peter Dixon, global equities economist at Commerzbank AG, said in a Bloomberg Television interview in London. “So long as the Germans are opposed, that’s not going to happen. Markets will come out of it slightly disappointed.”

The Stoxx 600 fell in the final two days of last week after German business confidence slid to a two-year low, adding to concern that the euro area’s sovereign-debt crisis is derailing growth. The measure has fallen 11 percent from its 2012 high on March 16 and 0.7 percent this year.

Merkel Opposition

Chancellor Merkel dismissed the possibility of debt sharing to resolve the area’s financial crisis, even as Spain announced it would formally seek aid for its ailing banks.

Merkel said today at a conference in Berlin that “euro bonds, euro bills and European deposit insurance with joint liability and much more” would be “economically wrong and counterproductive.” They ran against the German constitution, she said.

Merkel will face an increasingly united bloc of euro-area nations at the summit demanding more ambitious policies to fight the crisis and preserve the euro. Leaders will attend pre-summit meetings as they work to narrow differences before the June 28-29 gathering in Brussels.

Soros Call

Billionaire investor George Soros called on Europe to start a fund to buy Italian and Spanish bonds, saying policy makers should create a European Fiscal Authority to purchase the debt in return for the countries implementing achievable budget cuts.

France and Italy are also urging Germany to take decisive action to end the 2 1/2-year-old debt crisis after Spain’s 10-year bond yields jumped to more than 7 percent last week, a level that economists consider unsustainable.

“There is a disagreement on the fiscal side,” Soros, 81, said in an interview with Bloomberg Television. “Unless that is resolved in the next three days, then I am afraid the summit could turn out to be a fiasco. That could actually be fatal.”

The Bank for International Settlements said in its annual report released yesterday that central banks are facing the limit of their ability to boost economic growth.

Central banks are being “cornered into prolonging monetary stimulus,” the Basel, Switzerland-based BIS said. “Both conventionally and unconventionally, accommodative monetary policies are palliatives and have their limits.”

National benchmark indexes declined in all 18 markets in western Europe today. France’s CAC 40 fell 2.2 percent, the U.K.’s FTSE 100 slid 1.1 percent and Germany’s DAX lost 2.1 percent. Greece’s ASE Index tumbled 6.8 percent.

Banks Decline

A gauge of European lenders fell 3 percent, the biggest decline among 19 industry groups on the Stoxx 600.

Unicredit, Italy’s largest lender, lost 8.4 percent to 2.46 euros and Intesa Sanpaolo SpA fell 6.5 percent to 97 euro cents as analysts at Exane BNP Paribas cut their 2013 earnings per share estimate for Italian banks by an average of 13 percent.

BNP Paribas, France’s largest bank, retreated 5.5 percent to 27.78 euros and Deutsche Bank AG, the biggest lender in Germany, slid 4.1 percent to 27.37 euros.

National Bank of Greece SA slid 14 percent to 1.27 euros. Alpha Bank AE dropped 18 percent to 1.02 euros and EFG Eurobank Ergasias SA tumbled 16 percent to 58 euro cents.

Greek Leader

Greek Prime Minister Antonis Samaras was discharged from hospital today after eye surgery, with doctors ordering bedrest for a week, throwing planning for the new Greek government into disarray.

Samaras won’t attend his first EU summit as premier where leaders were due to grill him on his coalition government’s bid to renegotiate the terms of a 130 billion-euro ($163 billion) rescue package. Finance Minister-designate Vassilios Rapanos was unexpectedly hospitalized on June 22.

Fitch Ratings Co. downgraded Cyprus to below investment grade, cutting it to BB+ from BBB- as the country negotiates international aid for its banks with both the European Union and Russia.

Nokia paced a retreat in technology companies, falling 11 percent to 1.71 euros, as Samsung Electronics, the world’s biggest maker of computer memory chips and flat screens, fell to a four-month low in Seoul.

Nokia also fell after the Sunday Times newspaper reported that Research In Motion Ltd. is considering selling its handset-manufacturing unit or a stake in the whole company to a larger technology firm, such as Microsoft Corp., without saying where it got the information.

Microsoft had this month been speculated to be a possible acquirer of Nokia.

Shire Tumbles

Shire sank 11 percent to 1,743 pence, the biggest drop since Oct. 2008, after the U.S. Food and Drug Administration approved a generic version of its hyperactivity medicine Adderall made by Actavis Group Hf. Analysts led by Brian Bourdot at Barclays Plc cut their 2013 profit forecast for the Dublin-based company by 14 percent.

Storebrand ASA declined 9.5 percent to 19.59 kroner after Norway’s second-largest publicly traded insurer lowered the reported solvency ratio at its life insurance unit to 146 percent from 163 percent. Solvency ratio is a measure of a company’s capacity to absorb losses.

Anheuser-Busch InBev NV climbed 2 percent to 56.75 euros. The world’s biggest brewer was said to be close to buying the remainder of Mexico’s Grupo Modelo SAB for more than $12 billion, according to a person with knowledge of the matter.

The purchase may be announced as soon as this week, said the person, who asked not to be identified as the discussions are confidential.

InBev said it is in talks with Modelo that may or may not lead to a transaction and that any speculation is premature.

SABMiller Plc slid 1.7 percent to 2,462.5 pence after Liberum Capital downgraded the shares to sell, saying the company’s premium to its peers may contract if InBev’s bid for Modelo goes ahead.

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