European Stocks Decline; Asian Shares, U.S. Futures Retreat

By Adria Cimino

Feb. 25 (Bloomberg) -- European stocks slipped as concern that Moody’s Investors Service may cut Greece’s debt rating overshadowed better-than-expected earnings from Royal Bank of Scotland Group Plc and France Telecom SA. Asian stocks and U.S. index futures fell.

Xstrata Plc, the largest exporter of coal used for power, led basic-resources shares lower as metals prices fell. RWE AG slid 1.7 percent after Germany’s second-biggest utility cut its earnings growth forecast. RBS, Britain’s largest government- controlled lender, and France Telecom, the country’s biggest phone company, climbed more than 2.5 percent.

Europe’s Dow Jones Stoxx 600 Index fell 0.3 percent to 246.41 at 1:02 p.m. in London. The benchmark gauge has retreated 5.3 percent from this year’s high on Jan. 19 amid concern over budget deficits in Greece, Spain and Portugal and as China moved to restrict lending and stop its economy from overheating. The measure has still rallied 56 percent since March last year.

“Any new element linked to Greece can have an impact on market sentiment and the outlook for growth,” said Guillaume Duchesne, a Luxembourg-based equity strategist at Fortis Private Banking, which oversees about $117 billion. “It’s a problem, especially in light of the mixed economic data that we’ve seen. Earnings are an element of support for the market. We’re very satisfied with the results.”

Greek Rating

Greece’s ASE Index slid 1.8 percent, the most among 18 western European markets, after Moody’s said the nation’s sovereign debt rating may be cut within months unless it meets the objectives of its deficit reduction plan. If Moody’s reduces its credit rating to the same level as the other major ratings companies, Greek government bonds would no longer be eligible as collateral at the European Central Bank, making it more difficult for the country to borrow.

Yesterday, after the close of Greek trading though while other European markets were still open, Standard & Poor’s said it may lower Greece’s credit rating again by the end of March as a weak economy and political opposition threaten the country’s ability to cut the European Union’s largest budget deficit.

Futures on the S&P 500 Index slid 0.6 percent before reports on durable-goods orders and jobless claims. The MSCI Asia Pacific Index fell 0.8 percent, a second day of losses.

European Confidence

European confidence in the economic outlook unexpectedly worsened in February after the euro region’s recovery almost stalled in the fourth quarter, according to the European Commission’s index of executive and consumer sentiment. The region’s economic recovery may fail to gather strength for most of 2010 as governments phase out stimulus measures and domestic demand remains “subdued,” the Commission said today in its semi- annual economic forecasts.

Xstrata sank 3.4 percent to 1,014.5 pence. Rio Tinto Group, the world’s third-biggest mining company, lost 2.6 percent to 3,274 pence. Copper, lead and nickel were among metals falling in London.

RWE slid 1.7 percent to 62.25 euros. The company said recurrent net income, which is used to calculate its dividend, will grow by an average of about 5 percent a year in the four years through 2012, down from an earlier target of about 10 percent.

RBS surged 6.6 percent to 38.53 pence, the largest gain in more than three weeks. The bank reported a narrower-than- expected full-year net loss and said impairments for bad loans are likely to have peaked.

France Telecom

France Telecom climbed 2.6 percent to 17.28 euros, the biggest intraday gain in more than three months. The company said full-year adjusted net income declined to 4.85 billion euros ($6.5 billion), beating the average analyst estimate of 4.6 billion euros.

Piraeus Bank SA lost 7.5 percent to 5.64 euros, leading Greek banks lower. The country’s fourth-biggest lender reported its lowest annual profit in five years after impairment losses increased amid mounting concern about Greece’s economic slump and the size of its budget deficit.

National Bank of Greece SA, the nation’s largest lender, fell 4 percent to 13.35 euros and EFG Eurobank Ergasias SA, the second-largest, slid 5 percent to 5.55 euros.

Hays Plc sank 9 percent to 103.1 pence, the largest intraday slide in more than two months, after the U.K.’s biggest recruitment company reported first-half profit that missed analysts’ estimates.

BAT, Tenaris

British American Tobacco Plc, Europe’s second-largest largest cigarette maker, dropped 1.9 percent to 2,1898 pence. The company posted full-year net income of 2.71 billion pounds ($4.16 billion), trailing the 2.95 billion-pound average estimate of six analysts surveyed by Bloomberg.

Tenaris SA sank 7 percent to 15.84 euros. The world’s biggest maker of seamless pipes used to extract oil and gas said four-quarter net income increased to $222.4 million. BofA- Merrill Lynch Global Research said the results were “weak” and the “outlook for 2010 stays cautious.”

BASF SE, the world’s largest chemical company, rallied 4.4 percent to 42.43 euros after cutting its dividend less than estimated. Shareholders will get a dividend of 1.70 euros a share, down from 1.95 euros in the prior year, the company said. Analysts had forecast a cut to 1.55 euros, according to a Bloomberg survey.

Safran SA, Europe’s second-largest maker of aircraft engines, jumped 9.4 percent to 16.47 euros. Adjusted net income for 2009 rose to 376 million euros, up from a restated 297 million euros, as the manufacturer benefited from higher defense and security sales.

Valeo, GKN

Valeo SA surged 5.9 percent to 21.87 euros. France’s second-largest car-parts maker reported a fourth-quarter profit as government-backed incentives spurred auto-industry sales. The company vowed to double its operating margin.

GKN Plc soared 7.4 percent to 111.3 pence. The U.K. maker of car parts for Volkswagen AG said it will make “significant progress” in 2010 and plans to restore dividend payments.

In the U.S., orders for durable goods probably rose in January by the most in four months, economists said before a Commerce Department report due at 8:30 a.m. in Washington. Bookings for goods meant to last several years increased 1.5 percent last month, according to the median estimate of 72 economists surveyed by Bloomberg News.

Labor Department figures at the same time may show that U.S. initial jobless claims fell to 460,000 last week from 473,000 the prior week.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.