European Stocks Decline; Greek Banks, G4S Retreat as BP Climbs

By Adria Cimino - Oct 17, 2011 8:59 PM GMT+0700

European stocks fell as a German government spokesman said that euro-area leaders will not provide a quick ending to the debt crisis at their next meeting.

National Bank of Greece SA (ETE), the country’s biggest lender, led bank shares lower. G4S Plc (GFS) slumped 20 percent after agreeing to acquire ISS A/S. BP Plc gained 2.9 percent after saying that Anadarko Petroleum Corp. will pay $4 billion to settle all claims for last year’s Gulf of Mexico oil spill.

The Stoxx Europe 600 Index retreated 0.7 percent to 236.91 at 2:58 p.m. in London, erasing an earlier gain of as much as 1.5 percent, after Germany’s government said that the European Union’s Oct. 23 summit will not provide a complete fix to the euro area’s sovereign debt crisis. More than four stocks fell for every one that rose.

“Markets are off their earlier highs on the back of wary comments from Germany suggesting that the upcoming EU summit won’t present a final solution for the euro-zone debt crisis,” said Stephane Ekolo, chief European strategist at Market Securities in London. “These comments remind investors how difficult it is to find a solution regarding the euro-zone woes. The problems are still out there and the solution isn’t really coming.”

Germany Damps Optimism

Stocks erased earlier gains after Steffen Seibert, German Chancellor Angela Merkel’s chief spokesman, told reporters in Berlin that European leaders won’t fulfill “dreams” of a quick end to the debt crisis at the Oct. 23 summit.

The Stoxx 600 advanced 2.8 percent last week. The gauge has still retreated 18 percent from this year’s high on Feb. 17 as concern mounted that Greece will default, pushing borrowing costs higher for other indebted euro-area countries. The gauge traded at 9 times its companies’ estimated earnings on Sept. 22, the cheapest since March 2009, according to data compiled by Bloomberg.

G-20 finance ministers and central bank governors concluded weekend talks in Paris endorsing parts of the emerging plan to avoid a Greek default, bolster banks and curb contagion.

The euro area’s plan, which has yet to be made public, includes writing down Greek bonds by as much as 50 percent, establishing a backstop for banks and magnifying the strength of the 440 billion-euro ($606 billion) temporary rescue fund known as the European Financial Stability Facility, people familiar with the matter said last week.

Hurdles to Overcome

Hurdles to overcome for the accord include resistance from bankers to a deeper restructuring of Greek debt as well as disagreements between Europe’s capitals over just how to multiply the firepower of their bailout fund and recapitalize financial institutions.

National benchmark indexes fell in 16 of the 18 western European markets. France’s CAC 40 Index slipped 0.6 percent. Germany’s DAX Index lost 1 percent and the U.K.’s FTSE 100 Index fell 0.3 percent. Greece’s ASE Index plunged 3.2 percent for the biggest decline of 18 national gauges.

National Bank of Greece sank 8.2 percent to 1.67 euros. Piraeus Bank SA (TPEIR) retreated 10 percent to 25.7 euro cents. EFG Eurobank Ergasias tumbled 9.5 percent to 66.1 euro cents.

A Federal Reserve report showed that industrial production, or output from factories, mines and utilities, increased 0.2 percent in September, matching the average economist estimate.

A separate report showed that manufacturing in the New York area contracted in October more than economists had forecast. The Empire State Index covering New York, northern New Jersey, and southern Connecticut gave a reading of minus 8.5, a larger drop than the average estimate of minus 4 in a Bloomberg News survey of economists.

G4S Drops

G4S Plc slumped 20 percent to 226.4 pence for the largest drop on the Stoxx 600. The world’s largest security provider agreed to acquire ISS for about 5.2 billion pounds ($8.2 billion), of which 3.7 billion pounds is assumed debt, to add cleaning and other facilities-management services and accelerate expansion in emerging markets.

BP Plc (BP/) soared 2.9 percent to 428.3 pence. BP, Europe’s second-largest oil company, said Anadarko will pay to settle all claims over the world’s largest accidental oil spill.

Anadarko, which had a 25 percent stake in the Gulf of Mexico well, will no longer pursue allegations of gross negligence against BP, the London-based company said.

Aviva Plc (AV/), the U.K.’s second-biggest insurer by market value, climbed 1.1 percent to 342.7 pence after the stock was raised to “buy” from “neutral” at UBS AG.

SGL Carbon Stake

SGL Carbon SE (SGL) soared 10 percent to 41.88 euros, its highest price since August 2008. Bayerische Motoren Werke AG (BMW) plans to buy a stake in the German maker of carbon and graphite materials, Spiegel said, citing an unidentified manager at the automaker.

Air France-KLM (AF) Group, Europe’s second-largest airline by sales, increased 3 percent to 5.69 euros. The company’s board meets today to vote on ousting Chief Executive Officer Pierre- Henri Gourgeon, according to two people with knowledge of the proposals.

L’Oreal SA (OR), the world’s biggest cosmetics company, advanced 1.4 percent to 79.59 euros. A French judged ruled that L’Oreal heiress and France’s third-richest person, Liliane Bettencourt, was mentally unfit to manage her own affairs. The court appointed Bettencourt’s daughter to manage her assets.

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

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