By Sarah Jones - Nov 21, 2011 5:47 PM GMT+0700
European stocks dropped for a third day amid signs U.S. lawmakers may fail to reach an agreement on budget cuts, raising the prospect America faces another credit downgrade. U.S. index futures and Asian shares also fell.
KBC Groep NV (KBC) led banks lower as dollar funding costs and bond yields climbed. Mining and energy companies dropped with metal and crude oil prices on signs of slowing growth in Asia. Carrefour SA (CA) slipped 2 percent after the retailer’s largest shareholders were said to consider replacing its chairman and chief executive officer.
The benchmark Stoxx Europe 600 Index sunk 2.2 percent to 227.17 at 10:45 a.m. in London, extending last week’s selloff. Futures on the Standard & Poor’s 500 Index expiring in December declined 1.6 percent and the MSCI Asia Pacific Index retreated 1.4 percent.
“Adding more uncertainty into the markets is the admission that the U.S. bipartisan supercommittee has failed at finding $1.2 trillion of spending cuts.” said Jonathan Sudaria, a trader at London Capital Spreads. “Given that the reasoning for the last U.S. downgrade was the political inability to get anything done and the soaring debt burden, it would be highly logical to expect more U.S. downgrades.”
The deficit-cutting congressional supercommittee will probably announce that it has failed to agree on $1.2 trillion of federal budget savings, a Democratic aide said in an e-mail.
The aide, who wasn’t authorized to discuss internal matters publicly and requested anonymity, said that it was highly unlikely that the talks could be salvaged. Today is the deadline for the Congressional Budget Office to receive a plan that it can analyze before the committee’s Nov. 23 target date for reaching an agreement. S&P downgraded the U.S. on Aug. 5 to AA+ from AAA.
In Spain, Mariano Rajoy won the biggest parliamentary majority in an election in almost 30 years, and told Spaniards to brace for difficult times as the nation fights to avoid being overwhelmed by the sovereign-debt crisis.
Rajoy’s People’s Party swept the ruling Socialists from power after eight years, winning 186 of the 350 seats in Parliament, compared with 110 for the ruling party’s candidate Alfredo Perez Rubalcaba.
Sovereign Borrowing Costs
Stocks tumbled around the world last week as borrowing costs surged to record levels in the euro area and policy makers disagreed over their response to the spreading debt crisis. The Stoxx 600 lost 3.7 percent as the yields on Italian and Spanish bonds climbed, and the cost of insuring against losses on the nations’ debt rose.
Greece’s new Prime Minister Lucas Papademos meets with European Union President Herman Van Rompuy and European Commission President Jose Barroso in Brussels today.
Antonis Samaras, leader of Greece’s New Democracy Party, told officials from the so-called troika of the EU, the International Monetary Fund and the European Central Bank that he won’t sign a document pledging his commitment to the Oct. 26 euro-area bailout package for his country, the Athens News Agency said.
Samaras, whose party is a member of the country’s unity government, said that he has already taken five actions that show New Democracy’s commitment to the agreement, the agency said.
KBC led bank shares lower, slumping 10 percent to 9.80 euros in Brussels, as the three-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, widened for a sixth day and bond yields climbed in Spain, Italy, France and Belgium.
Commerzbank, BNP Paribas
Commerzbank AG (CBK) declined 4.5 percent to 1.39 euros, BNP Paribas SA slid 5.4 percent to 26.54 euros and Barclays Plc (BARC) retreated 4.8 percent to 158.5 pence.
Shares also fell as Moody’s Investors Service warned that rising French bond yields increased the fiscal challenges facing the nation with “negative credit implications.” The rating company declined to comment on a report in Le Figaro newspaper that France’s AAA credit rating is at risk.
Rio Tinto Group slid 4.7 percent to 3,121.5 pence and Total SA (FP) lost 2.3 percent to 36.27 euros, pacing gauges of mining and energy companies lower. Copper and oil fell for a third day as Japan’s exports dropped and Singapore warned its economy may grow 1 percent to 3 percent in 2012 after expanding 5 percent this year.
Carrefour slipped 2 percent to 18.06 euros after people familiar with the matter said shareholders may replace the retailer’s Chairman and CEO Lars Olofsson.
Groupe Arnault SAS and Colony Capital LLC, which hold a combined 16.15 percent of Carrefour and 22.14 percent of the voting rights, will give Olofsson until the end of the year to improve the company’s performance in its domestic and largest market, said the people, who asked not to be named as the discussions are private.
Statoil ASA (STL) slid 1.7 percent to 143 kroner after Norway’s national oil company agreed to sell stakes in fields to Centrica Plc (CNA) for $1.6 billion. Statoil will dispose of stakes in eight fields on the Norwegian continental shelf, it said. Centrica’s shares were little changed at 288 pence.
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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