European Stocks Retreat as EU Finance Ministers Meet

European Stocks Advance as EU Finance Ministers Meet on Crisis
Rio Tinto Group led metal producers higher as base metals advanced in London. Photographer: Carla Gottgens/Bloomberg

European stocks declined for a second day as the region’s finance ministers gathered in Luxembourg to discuss the sovereign-debt crisis.

Bankia SA led the decline, falling to a two-month low. Alcatel-Lucent SA dropped to the lowest in at least 23 years as Credit Suisse Group AG said weakness should continue into the third quarter. Vedanta Resources Plc led mining companies higher, limiting losses in Europe.

The Stoxx Europe 600 Index slipped 0.5 percent to 270.20 in London. The gauge yesterday dropped 1 percent as the World Bank cut its East Asian growth forecast and has trimmed its advance this year to 10 percent.

“There is a real tug of war going on,” said Stewart Richardson, chief investment officer of RMG Wealth Management on Bloomberg Television in London. “On the one hand, fundamentals have been deteriorating. On the other hand you have money-printing that has been enough to send market higher. We are very cautious in the medium term and are waiting for a signal from the market.”

National benchmark indexes fell in all but two of the 18 western European markets. The U.K.’s FTSE 100 slipped 0.5 percent, Germany’s DAX lost 0.8 percent, while France’s CAC 40 retreated 0.7 percent.

The euro dropped to $1.2882, the lowest since Oct. 3, as of 4:26 p.m. in London.

Crisis Talks

Finance ministers from all the 27 countries in the European Union convened in Luxembourg today in the lead up to a summit of the region’s leaders in Brussels on Oct. 18-19.

Ministers from the 17-nation euro area yesterday declared the 500 billion-euro ($649 billion) European Stability Mechanism operational. They also said Spain, the permanent rescue fund’s biggest potential near-term customer, isn’t on the verge of tapping it.

German Chancellor Angela Merkel arrived in Greece today for the first time since the debt crisis began in 2009 after the finance ministers yesterday hailed the country’s determination to cut its budget and reshape its economy, raising the chances that aid will keep flowing to Greece.

Dow Jones reported that Greece’s creditors are yet to reach an agreement on how best to tackle the country’s debt crisis. The newswire cited people with direct knowledge of the matter.

‘Tired Market’

“We think markets can go a bit lower,” said RMG’s Richardson. “The market is looking very tired and it’s certainly not a buy and hold environment. The global economy is slowing.”

In Washington, the International Monetary Fund cut its global growth forecasts to 3.3 percent this year, the slowest since the 2009 recession, and reduced its estimate for next year to 3.6 percent. That compares with July predictions of 3.5 percent in 2012 and 3.9 percent in 2013.

Bankia dropped 9.8 percent to 98 euro cents, extending its losses since Sept. 21 to 32 percent. The lender’s parent company, BFA, will book losses of more than 4.5 billion euros this year as it cleans up the balance sheet, Expansion reported today. The newspaper said the company will return to profit from 2013, without saying where it got the information.

Banco Popular Espanol SA, Spain’s sixth-largest lender by assets, dropped 2.7 percent to 1.43 euros, for a 10th day of losses.

Alcatel-Lucent dropped 5.1 percent to 73.9 euro cents, the lowest price since at least October 1989, as Credit Suisse reiterated its underperform recommendation for the French phone-equity supplier, the equivalent of a sell rating. Analysts said “weak trends” in the first half may continue into the third quarter.

Leoni, Aggreko

Leoni AG and Aggreko Plc declined 4.3 percent to 28.87 euros and 3.4 percent to 2,240 pence, respectively, after HSBC Holdings Plc downgraded both companies to neutral from overweight, a recommendation similar to buy. Capita Plc slid 3.7 percent to 740 pence as its shares were cut at Panmure Gordon & Co. and Seymour Pierce Ltd. to sell and hold, respectively.

Marine Harvest ASA slid 3.1 percent to 4.75 kroner after the world’s biggest salmon farmer said its third-quarter profit will miss analyst forecasts because of “challenging market conditions” in Chile and Canada.

Vedanta Throughput

Vedanta Resources paced advancing shares on the Stoxx 600, climbing 2.1 percent to 1,090 pence. The company reported a 22 percent increase in oil and gas output for the second quarter to a record after ramping up production at its Rajasthan block in India.

Vedanta, which was primarily a mine operator, completed the purchase of a controlling stake in oil and gas explorer Cairn India Ltd. for $8.67 billion in December, giving it access to India’s biggest onshore oilfield.

Rio Tinto Group gained 1.5 percent to 3,030 pence. The world’s third-largest mining company today said it will deepen cost cutting efforts after it lowered its estimates for China’s economic growth to below 8 percent.

STMicroelectronics NV climbed 2.9 percent to 4.44 euros after Europe’s largest semiconductor company and Ericsson AB said they’re working with an adviser on options for their unprofitable chipmaking venture ST-Ericsson.

The 50-50 partnership hasn’t turned profitable since it was formed in 2009.

Hays Plc jumped 5.7 percent to 79.5 pence, the biggest advance on the Stoxx 600. The shares rebounded from yesterday’s 4.4 percent selloff after the U.K. recruiter reported first-quarter net fees that fell less than estimated. The company said fees declined 1 percent, beating Deutsche Bank AG’s estimate for a 5 percent drop.

Marks & Spencer Plc climbed 3.2 percent to 381.3 pence after JPMorgan Chase & Co. said the company, along with Debenhams Plc and Home Retail Group Plc, will be the important retail stocks to own in the first half of 2013 as consumer economic indicators stabilize.

Debenhams added 2.1 percent to 107.2 pence, while Home Retail advanced 3.2 percent to 97.3 pence.

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