European Stocks Decline Before Slovakia Vote

By Peter Levring - Oct 11, 2011 5:20 PM GMT+0700

European stocks fell, snapping a four-day rally, as investors awaited a Slovak vote on the euro- area bailout fund and the start of the American earnings season. Asian shares advanced while U.S. index futures declined.

Antofagasta Plc (ANTO), the copper miner controlled by Chile’s Luksic family, slid 1.9 percent as the base metal retreated for the first time in five days in London amid muted buying in the Chinese physical market. ASML Holding NV (ASML) and STMicroelectronics NV (STM) led semiconductor shares lower after analyst downgrades. Rockhopper Exploration Plc (RKH) jumped 6.3 percent after raising oil- reserve estimates.

The benchmark Stoxx Europe 600 Index lost 0.8 percent to 234.03 at 11:19 a.m. in London. The gauge had advanced 8.5 percent over the previous four days for the biggest rally since November 2008. The measure has still fallen 20 percent from this year’s peak on Feb. 17.

“Slovakia is causing some uncertainty, but if the vote is passed later today there’s a good chance the rise in euro- related stocks will continue,” 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.”

The MSCI Asia Pacific Index rose 1.7 percent today for the biggest four-day rally since March 2009. Standard & Poor’s 500 Index futures declined 0.5 percent.

Slovak Vote

A planned reinforcement of the European bailout fund, known as the EFSF, faces a vote today in Slovakia’s parliament, with one party in the governing coalition holding out against approval. Slovak Prime Minister Iveta Radicova’s party is seeking to pressure rebel lawmakers by tying the EFSF ratification to a no-confidence motion, two government officials said under condition of anonymity.

“Some traders are alarmed that certain parts of the Slovak coalition are outright refusing to back the bill and the fact that it’s success or failure now resides in their hands,” Jonathan Sudaria, a trader at London Capital Group, wrote in e- mailed comments.

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.”

July 21 Accord

The ECB is against any backsliding from a July 21 accord on a second Greek bailout, a central bank official said yesterday. An appeal to “fully implement all aspects” of the road map was inserted into last week’s monthly policy statement as a warning to Germany, the official said under condition of anonymity.

Luxembourg’s Jean-Claude Juncker said last night, when asked on Austria’s ORF television to comment on speculation investors may lose 50 percent to 60 percent of the value of their holdings of Greek bonds, that haircuts may exceed the 21 percent agreed upon by euro-region leaders in July.

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.

Mining Companies Fall

Antofagasta dropped 1.7 percent to 1,075 pence and Kazakhmys Plc (KAZ) retreated 2 percent to 869 pence. Copper declined for the first time in five days in London trading on concern muted buying in the Chinese physical market signals a slowdown in demand from the biggest consumer.

ASML Holding NV declined 2.5 percent to 26.60 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 2.8 percent to 5.27 euros in Milan as Citigroup Inc. downgraded the shares to “sell”

Rockhopper rose 6.3 percent to 180.5 pence. The U.K. explorer focused on the Falkland Islands raised its estimate of oil resources at the Sea Lion field after reviewing data.

Porsche SE, the maker of the 911 sports car, slid 2.5 percent to 36.83 euros and Renault SA slid 1.3 percent to 26.50 euros. Automakers had the third-worst performance among 19 industry groups in the Stoxx 600.

Greek Banks

The four biggest Greek lenders fell more than 4 percent. National Bank of Greece SA slipped 6.3 percent to 1.78 euros and EFG Eurobank Ergasias SA retreated 7.4 percent to 64.8 euro cents. Piraeus Bank SA (TPEIR) sank 7 percent to 29.1 euro cents while Alpha Bank SA dropped 5.3 percent to 98 euro cents.

Givaudan SA (GIVN) gained 1.2 percent to 754 Swiss francs even after the maker of the fragrances for Marc Jacobs’s Lola and Paco Rabanne’s 1 Million 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 expected 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.

Debenhams Plc (DEB), the second-largest U.K. department-store owner, advanced 3.2 percent to 66.35 pence as Morgan Stanley upgraded the shares to “overweight” from “equal weight.”

To contact the reporter on this story: Peter Levring in Copenhagen at Plevring1@bloomberg.net or

To contact the editor responsible for this story: Andrew Rummer in London at arummer@bloomberg.net