By Julie Cruz - Oct 18, 2011 5:31 PM GMT+0700
European stocks fell as concern that France may lose its top credit rating added pressure on the region’s leaders to find a solution to the debt crisis and as China’s economy grew at the slowest pace in two years. Asian shares and U.S. index futures dropped.
BHP Billiton Ltd. (BHP) and Rio Tinto Group led mining shares lower as metals declined. BNP Paribas (BNP) SA and Societe Generale (GLE) SA sank more than 5 percent as Moody’s Investors Service said France’s Aaa rating is under strain. Dexia SA (DEXB) tumbled 15 percent as the European Commission opened an in-depth probe into Belgium’s takeover of its local consumer-lending unit.
The benchmark Stoxx Europe 600 Index lost 0.8 percent to 234.28 at 11:30 a.m. in London. The gauge retreated 1 percent yesterday as a German government spokesman said that euro-area leaders will not provide a complete fix to the debt crisis at their next meeting. The measure has still rallied 9 percent from this year’s low on Sept. 22.
“The crisis is not over yet,” said Martin Huefner, chief economist at Assenagon GmbH in Munich, which manages more than $4.7 billion of client assets. “We had a very strong rally in the last couple of weeks, which was exaggerated. There was no fundamental reason behind it.”
The MSCI Asia Pacific Index retreated 2.4 percent today. Standard & Poor’s 500 Index futures fell 0.2 percent before companies from Johnson & Johnson to Bank of America Corp. and Goldman Sachs Group Inc. report earnings.
Plan Divisions
While Group of 20 finance ministers and central bankers are pressing European Union leaders to set out a strategy by the end of the week, divisions are flaring over an emerging plan to avoid a Greek default, bolster banks and curb contagion.
“As Sunday’s upcoming EU summit draws closer the hoped for consensus ‘Grand Plan’ still seems a long way off,” Jim Reid, head of fundamental strategy at Deutsche Bank AG in London, wrote in a note to investors today. “Views across the various EU stakeholders remain divided.”
In Greece, a parliamentary debate starts today on a fresh round of austerity measures amid public protests and labor-union unrest. Finance Ministry workers began a 10-day strike yesterday, complicating the government’s efforts to collect taxes and highlighting the mood in Europe’s most-indebted country as Greek lawmakers face another vote on fiscal measures due in two days. That’s a showdown Prime Minister George Papandreou needs to win to ease the way for more foreign financing and stave off default.
China Economy
China’s economy grew 9.1 percent in the third quarter from a year earlier, the slowest pace since 2009. The gain was less than the median estimate of 9.3 percent in a Bloomberg News survey of 22 economists and followed a 9.5 percent increase in the previous three months. The statistics bureau released the data in Beijing today.
“In China, I am concerned that growth could fall below 9 percent in the fourth quarter because they’re still rather restrictive in their monetary policy and inflation is still high,” Assenagon’s Huefner said.
German investor confidence fell to the lowest in almost three years in October. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict developments six months in advance, declined to minus 48.3 from minus 43.3 in September. Economists had expected a drop to minus 45, according to the median of 39 estimates in a Bloomberg News survey.
BHP, Rio Tinto
BHP Billiton, the world’s biggest mining company, lost 2.7 percent to 1,858.5 pence, while Rio Tinto, the second-largest, sank 4.9 percent to 3,141.5 pence. Copper slumped for a second day in London amid concern demand from China may slow as the economy cools. Lead, nickel, tin and zinc also fell.
Xstrata Plc (XTA) retreated 3.2 percent to 918.8 pence even after the largest exporter of power-station coal said total third- quarter production of the fuel rose 8.1 percent. Copper output fell 4 percent, the company said.
BNP Paribas, France’s biggest bank, declined 6.2 percent to 29.13 euros. Societe Generale sank 5.8 percent to 19.07 euros.
France’s Aaa credit rating is under pressure from deterioration in debt metrics and the potential for additional liabilities from Europe’s debt crisis, according to Moody’s. The nation’s financial strength has weakened because of the global economic crisis, making the nation’s debt measures the weakest among its Aaa-rated peers, the New York-based company said in a statement late yesterday that it called a markets update.
Dexia Declines
Dexia plunged 15 percent to 49.1 euro cents, the lowest level on record. The European Commission opened an in-depth probe into Belgium’s takeover of Dexia’s local consumer-lending unit while granting temporary approval for the rescue.
Air France-KLM (AF) Group slid 3.7 percent to 5.40 euros after the airline ousted Pierre-Henri Gourgeon as chief executive officer amid slumping earnings and questions regarding the role of pilots in a fatal crash.
Aixtron SE, a supplier to the semiconductor industry, posted the second-worst performance in the Stoxx 600, sinking 6.7 percent to 9.84 euros. The company’s third-quarter results are likely to be “disastrous,” CA Cheuvreux analyst Klaus Ringel wrote in a report.
Danone (BN), the owner of the Evian and Volvic bottled-water brands, rose 1.5 percent to 46.07 euros as three people familiar with the matter said the company is in talks to sell water assets to Japan’s Suntory Holdings Ltd. Danone also reported third-quarter revenue that beat estimates as it sold more baby food and medical nutrition products in China and Indonesia.
To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
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