European Stocks Snap Four-Day Rally Before Slovakia Vote; Greek Banks Fall
European stocks fell, snapping a four-day rally, as investors awaited the start of the U.S. earnings season amid uncertainty that Slovakia will ratify the euro area’s revised bailout fund.
National Bank of Greece SA (ETE) and EFG Eurobank Ergasias SA sank more than 16 percent to the lowest levels on record. ASML Holding NV (ASML) and STMicroelectronics NV (STM) led semiconductor shares lower after analyst downgrades. Remy Cointreau SA (RCO), the maker of Remy Martin, advanced after Berenberg Bank recommended buying the shares.
The benchmark Stoxx Europe 600 Index slipped 0.3 percent to 235.28 at the close of trading, having earlier retreated as much as 1.2 percent. The gauge advanced 8.5 percent over the previous four days for its biggest rally since November 2008. The measure has still fallen 19 percent from this year’s peak on Feb. 17 amid speculation the European debt crisis will derail the economic recovery.
“Slovakia is causing some uncertainty,” said Witold Bahrke, a Copenhagen-based senior strategist at PFA Pension A/S, which manages $45 billion. “It seems the market is pricing in both a recapitalization of banks as well as Germany and France having agreed on a larger haircut on Greek debt.”
National benchmark indexes fell in 15 of the 18 western European markets. The U.K.’s FTSE 100 declined 0.1 percent and France’s CAC 40 slipped 0.3 percent, while Germany’s DAX added 0.3 percent.
Slovakia is due to vote today on the euro area’s retooled bailout fund. The largest opposition party, which pledged to reject the motion, will back the European Financial Stability Facility in a second vote, if lawmakers fail to approve it today, Robert Fico, the group’s leader, told reporters in Bratislava. That would give the measure a majority.
“There is likelihood that the bailout fund will eventually be approved this week, one way or the other,” Slovak Finance Minister Ivan Miklos said.
Slovakia is the only country in the 17-nation euro area that hasn’t ratified the measures, following approval in Malta yesterday.
“If Slovakia do not ratify EFSF enhancements then it is feasible that the whole deal will collapse, which would most likely lead to sharp correction in risk sentiment,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman and Co. in New York, wrote in a report.
European Central Bank President Jean-Claude Trichet said the debt crisis threatens the region’s financial system as officials race to put together a new plan to end the turmoil.
“The crisis has reached a systemic dimension,” Trichet told lawmakers in Brussels today in his capacity as head of the European Systemic Risk Board. “Sovereign stress has moved from smaller economies to some of the larger countries. The crisis is systemic and must be tackled decisively.”
Alcoa Inc., the largest U.S. aluminum producer, is due to become the first company in the Dow Jones Industrial Average to issue third-quarter earnings after the U.S. market closes today. Net income will be 23 cents a share, compared with 9 cents a year earlier, according the average estimate of 15 analysts surveyed by Bloomberg.
The four biggest Greek lenders fell more than 16 percent. National Bank of Greece sank 16 percent to 1.60 euros and EFG Eurobank Ergasias SA (EUROB) retreated 20 percent to 56 euro cents. Piraeus Bank SA (TPEIR) tumbled 20 percent to 25.4 euro cents, while Alpha Bank SA dropped 19 percent to 83 euro cents.
ASML fell 3 percent to 26.53 euros as ING Groep NV cut shares of Europe’s biggest semiconductor-equipment maker to “hold” from “buy,” citing recent outperformance ahead of tomorrow’s earnings report.
STMicroelectronics declined 4.1 percent to 5.19 euros in Milan as Citigroup Inc. downgraded the shares to “sell.”
Remy Cointreau added 3.1 percent to 56.50 euros. Berenberg raised its recommendation on the stock to “buy” from “hold.”
Actelion Ltd. (ATLN), Switzerland’s largest biotechnology company, increased 5.1 percent to 32.46 francs after Jefferies Group Inc. upgraded the shares to “buy” from “hold.”
Rockhopper Exploration Plc (RKH) jumped 13 percent to 191.25 pence. The U.K. energy explorer focused on the Falkland Islands raised its estimate of oil resources at the Sea Lion field after reviewing data.
Givaudan SA (GIVN) gained 2.6 percent to 764 francs even after the maker of fragrances for Marc Jacobs’s Lola reported third- quarter sales that missed analysts’ estimates.
The company stuck to a mid-term forecast to expand at about double the pace of the 2 percent to 3 percent growth predicted for the wider market. Price increases will mitigate half the impact of more expensive raw materials this year and fully alleviate them next year, Givaudan said.
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