European Stocks Retreat as Euro Area Borrowing Costs Increase
European stocks declined, extending their biggest drop in three weeks, as borrowing costs rose in the euro area, outweighing rating companies’ reaffirmation of America’s credit grades.
Dexia SA led banks (SX7P) lower, slumping 8.1 percent, as Belgium’s bond yields rose to their highest level since 2008. Commerzbank AG slumped 15 percent on a report the lender may need more capital. Nokia Oyj (NOK1V) dropped 8.8 percent amid concern that the company has shipped fewer smartphones than estimated. British Land Co. (BLND) led a rally in real-estate companies.
The benchmark Stoxx Europe 600 Index slipped 0.7 percent to 223.27 at the close as banks and technology companies retreated. The gauge earlier advanced as much as 1 percent after Standard & Poor’s and Moody’s Investors Service reaffirmed America’s credit grades.
“The environment is very much presented as a black and white one, but actually it’s more complicated,” said Lucy MacDonald, chief investment officer for global equities at RCM UK Ltd. on Bloomberg Television. “That is the problem and that is what is causing volatility. There are numerous scenarios that could ensue.”
The Stoxx 600 slumped the most yesterday since Nov. 1 amid signs U.S. lawmakers would fail to reach an agreement on budget cuts, increasing the likelihood that the country would face another credit downgrade. Banks sank as dollar funding costs and euro-area bond yields surged.
S&P and Moody’s maintained their U.S. credit ratings even as Congress’s special debt-reduction committee failed to reach an agreement, setting the stage for $1.2 trillion in automatic spending cuts.
Spain’s three-month borrowing costs more than doubled at auction today, sending two-year yields toward the highest level since 2003, while Belgium’s 10-year bond yields rose to more than 5 percent, adding to concern the euro crisis is spreading.
In the U.S., a report showed that U.S. gross domestic product climbed at a 2 percent annual rate from July through September, down from a previous estimate of 2.5 percent, revised Commerce Department figures showed today in Washington. The median forecast of 81 economists surveyed by Bloomberg News called for no revision.
National benchmark indexes retreated in all of the 18 markets in western Europe. France’s CAC 40 Index slipped 0.8 percent, Germany’s DAX Index lost 1.2 percent and the U.K.’s FTSE 100 Index slipped 0.3 percent.
Germany earlier today rejected calls from allies and investors to do more to counter market turmoil. Michael Meister, finance spokesman for Chancellor Angela Merkel’s Christian Democratic bloc said there is no “new bazooka to pull out of the bag.”
“We see no alternative to the policy we follow,” he said in a telephone interview. “We need to tell markets this very clearly.”
Dexia led a selloff in banks, tumbling 8.1 percent to 23.9 euro cents in Brussels. UniCredit SpA fell 4.2 percent to 70.05 euro cents in Milan, while BNP Paribas SA lost 4.9 percent to 25.53 euros in Paris.
Commerzbank dropped 15 percent to 1.15 euros after Reuters reported that Germany’s second-biggest lender may need about about 5 billion euros ($6.8 billion) in additional capital if the European (SXXP) Banking Authority toughens its requirements for lenders. The newswire cited unidentified people familiar with the bank’s own estimates.
Danske Bank A/S (DANSKE) still advanced, rising 1.4 percent to 75 kroner after Cevian Capital AB, a Swedish investment company, bought a 5.02 percent stake in Denmark’s largest lender on behalf of itself and Carl Icahn.
Nokia dropped 8.8 percent to 4.19 euros as Pacific Crest Securities Ltd. said in a report that the Finnish phone maker shipped fewer devices running Windows Phone 7 than predicted, while sales for the company’s Lumia product were “disappointing.”
Jefferies Group Inc. said in a note to clients that it has turned “incrementally cautious on Nokia,” due to signs that the company’s order book has slowed into the fourth quarter.
Thomas Cook Group Plc (TCG) plunged 75 percent to 10.2 pence as Europe’s second-largest tour operator said it has held talks with banks on financing. The company agreed to relaxed loan conditions a month ago. Rival TUI Travel Plc slid 9.2 percent to 136.7 pence.
Pandora A/S (PNDORA) jumped 10 percent to 55.05 kroner for the biggest jump on the Stoxx 600 after the Danish jewelry maker reported a third-quarter profit of 341 million kroner ($62 million), beating most analysts’ estimates.
British Land Rallies
British Land Co. rose 1.5 percent to 461 pence after Bank of America Corp. upgraded the U.K.’s second-largest REIT to “buy” from “neutral.” Separately, UBS AG cited British Land as the “most defensive of the U.K. majors.”
Zodiac Aerospace (ZC) rallied 4.6 percent to 55.29 euros after the maker of aeronautical equipment forecast about 20 percent growth in sales on a like-for-like basis in its first quarter, as the company supplies parts to new aircraft programs at Boeing Co. and Airbus SAS. Zodiac also plans to increase its dividend payment by 20 percent to 1.20 euro apiece.
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