By Sarah Jones - Nov 1, 2011 5:35 PM GMT+0700
European stocks dropped, extending the Stoxx Europe 600 Index’s biggest plunge in four weeks, as the announcement of a Greek referendum spurred concern that the country may default. U.S. futures and Asian shares retreated.
Credit Suisse Group AG (CSGN) and Danske Bank A/S led a selloff in lenders, both dropping more than 7 percent, after earnings fell short of analysts’ estimates. National Bank of Greece SA (ETE) sank 12 percent in Athens trading. Mining companies tumbled after a gauge of Chinese manufacturing dropped to the lowest level since February 2009.
The Stoxx 600 slid 3.2 percent to 235.67 at 10:33 a.m. in London, extending yesterday’s 2.2 percent selloff. Futures contracts on the Standard & Poor’s 500 Index lost 2 percent and the MSCI Asia Pacific Index dropped 2.2 percent.
“After the euphoria from last week’s euro-zone summit, this is a dose of cold water and introduces further uncertainty into the market,” said Edmund Shing, chief European strategist at Barclays Plc (BARC) in London. “It just shows you how important details have become. It’s not as bad as the market makes out and is more of a knee-jerk reaction. We don’t yet know when the referendum will take place.”
The VStoxx Index (V2X), which measures the cost of protecting against a decline in shares on the Euro Stoxx 50 Index, jumped 16 percent percent to 40.57, its biggest gain since Sept. 9. European stocks slid the most since Oct. 4 yesterday, paring the Stoxx 600’s biggest monthly advance since 2009, as investors awaited details on how Europe will fund its expanded bailout facility.
Greek Bailout Referendum
U.S. stocks extended the selloff and Asian shares tumbled after Greek Prime Minister George Papandreou called a referendum on the euro area’s latest bailout package, saying voters will give him support to proceed with economic reforms.
Papandreou’s gambit risks pushing the country into default if voters reject the financial accord. An opinion poll published on Oct. 29 showed most Greeks believe the euro area’s expanded bailout package and debt writedown are negative.
Leaders from the Group of 20 meet at a summit on Nov. 3-4 in Cannes, France, a week after the euro area’s authorities pledged to expand their rescue fund to 1 trillion euros ($1.4 trillion). They have already sought financial help from China and cooperation from the International Monetary Fund.
Credit Suisse Plunges
Credit Suisse slumped 7.7 percent to 23.62 Swiss francs after the second-largest Swiss bank announced 1,500 more job cuts and plans to reorganize its securities unit after the division reported its first quarterly loss since 2008.
Third-quarter net income rose 12 percent to 683 million Swiss francs ($768 million), helped by an accounting gain from the widening of its credit spreads, the Zurich-based bank said. That missed the 979 million-franc mean estimate of 12 analysts surveyed by Bloomberg.
Danske Bank tumbled 9 percent to 67.80 kroner after Denmark’s largest lender reported an unexpected third-quarter net loss of 384 million kroner ($71 million). That compares with the average analyst estimate of a 763 million-krone profit in a Bloomberg survey. The Danish lender also announced plans to cut 2,000 jobs.
A gauge of European banks sank 5.7 percent, its largest decline in four weeks. National Bank of Greece and EFG Eurobank Ergasias SA (EUROB), the country’s two biggest lenders, lost 12 percent to 1.51 euros and 15 percent to 58 euro cents, respectively. Greece’s benchmark ASE Index plunged 6.1 percent.
Barclays Plc dropped 7.6 percent to 180.5 pence as UBS AG lowered its recommendation for Britain’s second-largest bank by assets to “neutral” from “buy.”
Commodity Companies Retreat
Mining companies declined with copper prices as a report showed a drop in manufacturing in China, the world’s biggest consumer of the base metal.
The Purchasing Managers’ Index fell to 50.4 in October from 51.2 in September, the China Federation of Logistics and Purchasing said in a statement. That compared with the median economist forecast of 51.8 in a Bloomberg News survey. A reading above 50 indicates expansion.
Separately, Australia’s central bank lowered its benchmark interest rate today for the first time since April 2009 as weaker global growth threatens to slow the nation’s resource- driven economy.
Xstrata Plc (XTA) declined 6.5 percent to 977.3 pence, Antofagasta Plc (ANTO) retreated 6 percent to 1,097 pence and BHP Billiton Ltd. (BHP), the world’s largest mining company, decreased 3 percent to 1,909.5 pence.
Legal & General Falls
Elsewhere, Legal & General Group Plc (LGEN) slid 6.7 percent to 103.1 pence, pacing a selloff in financial shares. The company posted a 0.7 percent drop in third-quarter sales to 1.34 billion pounds ($2.1 billion) because of lower revenue from insured savings and annuities.
Sandvik AB (SAND) dropped 3.7 percent to 86.85 kronor. The world’s biggest maker of metal-cutting tools posted a 60 percent plunge in third-quarter profit to 626 million kronor ($95 million) after a writedown on goodwill for a business it plans to sell. The company also said it will cut 365 jobs in Sweden.
Just over half of the 150 companies in the Stoxx 600 that have released earnings since Oct. 11 beat analysts’ profit estimates, according to data compiled by Bloomberg.
Daimler AG (DAI) paced a selloff in carmakers, plunging 5.4 percent to 35 euros as Barclays downgraded the world’s third- largest maker of luxury vehicles to “underweight” from “equal weight.”
G4S Plc (GFS) advanced 2 percent to 249 pence, one of three companies to rise on the Stoxx 600 today. The company abandoned its plan to buy ISS A/S, a Danish cleaning-services company, following a revolt by shareholders.
U.S. Manufacturing Report
In the U.S., a report today may show manufacturing in the world’s largest economy expanded at a faster pace in October, driven by exports and consumer spending, economists said. The Institute for Supply Management’s factory index, due at 10 a.m. New York time, rose to 52 from 51.6 in September, according to the median economist forecast.
Federal Reserve officials begin a two-day meeting today to determine whether additional steps, such as another round of securities purchases or changes to public communication, are needed to spur growth.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
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