European Stocks Decline After Greek Aid Cutoff
By Adria Cimino - Nov 3, 2011 8:17 AM GMT
European stocks dropped after euro- area leaders halted aid payments to Greece before its referendum on the region’s bailout plan and theFederal Reserve forecast little acceleration in the U.S. economy. Asian shares and U.S. index futures also retreated.
BNP Paribas SA, France’s biggest bank, plunged 6.1 percent after quarterly profit sank 72 percent, missing analyst estimates. ING Groep NV (INGA), the largest Dutch financial-services company, fell 3.3 percent after announcing job cuts. Metro AG (MEO), Germany’s largest retailer, slipped 1.5 percent after reporting profit that trailed analyst estimates.
The benchmark Stoxx Europe 600 Index declined 1.3 percent to 234.26 at 8:06 a.m. in London. Futures on the Standard & Poor’s 500 Index lost 1.2 percent and the MSCI Asia Pacific Index also slid 1.2 percent.
The Stoxx 600 has lost 5.8 percent so far this week as Greece called a referendum on the latest bailout package, spurring concern that a rejection of the measures may push the country into default.
“With the uncertainty of a disorderly default hanging over markets, traders will be in a risk-off mood,” Jonathan Sudaria, a trader at London Capital Group, wrote.
European leaders cut off aid payments to Greece and said a referendum in five weeks will determine whether the debt- strapped nation becomes the first to exit the 17-country euro area.
Emergency Talks
Crisis talks ended in the French resort of Cannes late yesterday with German ChancellorAngela Merkel and French President Nicolas Sarkozy withholding 8 billion euros ($11 billion) of assistance and warning Greece it will surrender all European aid if it votes against the package agreed upon only last week.
“The referendum will revolve around nothing less than the question: does Greece want to stay in the euro, yes or no?,” Merkel told reporters. Sarkozy said Greek Prime Minister George Papandreou’s government won’t get a “single cent” of aid if voters reject the plan.
Today’s summit of leaders from the Group of 20 economies opens with a lunch-time discussion on Greece and the euro area after the leaders of France, Germany, Italy and Spain hold another round of talks in the morning.
U.S. Economy
Fed Chairman Ben S. Bernanke signaled additional monetary stimulus may be needed to lower U.S. unemployment as policy makers projected little acceleration in growth after last quarter’s pickup.
Potential actions are “on the table,” including a third round of securities purchases, extending the period of record- low interest rates or being more specific about when rates would rise, Bernanke said at a press conference yesterday after European markets closed.
Bernanke warned that economic improvement will probably be “frustratingly slow,” with policy makers forecasting a 1 percentage-point drop in the jobless rate to about 8 percent over two years.
BNP Paribas (BNP) sank 6.1 percent to 27.89 euros. The bank said third-quarter profit fell 72 percent to 541 million euros because of a writedown on Greek sovereign debt and losses from selling European government bonds. That missed the 1.24 billion- euro average estimate of 13 analysts surveyed by Bloomberg. The bank took a 2.26 billion-euro pretax writedown on Greek sovereign debt in the period.
ING, Metro
ING fell 3.3 percent to 5.47 euros even though it reported earnings that beat estimates. The company had third-quarter net income of 1.69 billion euros. The average estimate was for 1.52 billion euros of profit in a Bloomberg survey of 12 analysts. The company said cost-cutting measures will lead to the elimination of about 2,000 internal and 700 contract jobs.
Metro slid 1.5 percent to 33.05 euros. The retailer reported third-quarter profit that missed analyst estimates as concern that Europe’s sovereign debt crisis will widen weighed onconsumer spending. Adjusted net income rose to 190 million euros, missing the 255.9 million-euro average of 11 analyst estimates compiled by Bloomberg. Sales fell 2 percent to 16 billion euros, falling short of analysts’ estimates of 16.2 billion euros.
ArcelorMittal slumped 4.9 percent to 13.71 euros. The world’s biggest steelmaker posted third-quarter profit that missed analyst estimates and forecast “volume and price pressures” in the fourth quarter.
Earnings before interest, taxes, depreciation and amortization totaled $2.41 billion, missing the $2.5 billion average estimate of 17 analysts surveyed by Bloomberg. Steel shipments in the fourth quarter will be lower than in the third, reflecting buyers’ “wait-and-see” approach, the company said.
Swiss Re Ltd. rose 3.3 percent to 47.73 Swiss francs. The world’s second-biggest reinsurer said third-quarter profit more than doubled to $1.35 billion. That beat the $539 million average estimate of nine analysts surveyed by Bloomberg.
Adidas AG (ADS) fell 2.7 percent to 50.02 euros. The world’s second-largest sporting-goods maker raised its earnings forecast after reporting third-quarter profit that beat estimates. Per- share earnings will rise at a rate “approaching” 16 percent in 2011, the company said. Adidas had previously forecast earnings would rise about 15 percent.
Man Group
Man Group Plc (EMG) rose 2.3 percent to 144.5 pence. The biggest publicly traded hedge-fund manager reported a smaller-than- forecast decline in pretax profit in the fiscal first half as the European debt crisis roiled markets.
Pretax profit dropped to $195 million in the six months through September from $227 million in the year-earlier period, London-based Man Group said. Man forecast a month ago pretax profit would be about $185 million.
Service industries in the U.S. probably grew at a faster pace in October, indicating the biggest part of the economy is holding up, economists said before a report today.
The Institute for Supply Management’s non-manufacturing index rose to 53.5 from 53 in September, according to the median estimate of 77 economists surveyed by Bloomberg News. Readings above 50 signal expansion. Productivity rebounded and jobless claims declined, other data may show.
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