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Stocks in Europe Fall Most in Six Weeks; BNP Paribas Tumbles on French Tax

Tuesday, 31 January 2012 | 00:00
European stocks dropped the most in six weeks as Portuguese bonds sank amid concern a meeting of the region’s leaders will fail to draw a line under the sovereign- debt crisis.
BNP Paribas SA (BNP) tumbled 7.1 percent, leading French banks lower, as President Nicolas Sarkozy said he will unilaterally impose a financial-transaction tax. Royal Philips Electronics NV (PHIA) fell 2.2 percent after reporting a larger-than-estimated loss. Hochtief AG (HOT) slid 5.8 percent after saying it will post a wider annual loss than previously anticipated.
The Stoxx Europe 600 Index retreated 1.1 percent to 252.52 at the close of trading, the largest slide since Dec. 14. The benchmark gauge has still rallied 18 percent from its Sept. 22 low as the U.S. economy maintained its recovery and speculation grew that the euro area will contain the sovereign-debt crisis.
“The outlook for economic growth in Europe in 2012 is not a healthy one and consensus forecasts for earnings-per-share growth likely do need to be adjusted downwards,” said Ian Scott, the chief global strategist at Nomura Holdings Inc. in London. “Nevertheless, even a recession in the euro area, and very slow growth elsewhere, is unlikely to be sufficient to undermine the market if governments and central banks are able to stabilize sovereign spreads and lessen the immediate tail risk of a messy sovereign default.”
Benchmark Indexes
National benchmark indexes fell in every western European market today, except Greece and Iceland. The U.K.’s FTSE 100 lost 1.1 percent, Germany’s DAX slid 1 percent and France’s CAC 40 retreated 1.6 percent.
European Union leaders gathered in Brussels for their first summit of 2012 as a deteriorating economy and the struggle to complete a Greek debt write off risk sidetracking efforts to stamp out the financial crisis. EU chiefs are discussing a German-led deficit-control treaty and the statutes of a 500 billion-euro ($661 billion) rescue fund to be set up this year.
The yield on Portugal’s 10-year bonds surged 217 basis points to a euro-era record of 17.39 percent today. Portuguese credit-default swaps also rose to a record, implying a 71 percent chance the government will default.
Greece and its private bondholders said Jan. 28 they expect to complete a deal in coming days after creditors signaled they would accept European government demands for a bigger cut in their debt holdings. European policy makers are discussing plans to directly intervene in Greek budget decisions as the country struggles to cut its deficit, two euro-region government officials said.
European Confidence
Euro-area confidence in the economic outlook improved less than forecast in January. An index of executive and consumer sentiment in the 17-nation euro area rose to 93.4 from a revised 92.8 in December, the European Commission said today. That was less than the median prediction of 93.8 in a Bloomberg survey of 30 economists.
BNP Paribas tumbled 7.1 percent to 32.18 euros and Societe Generale (GLE) SA plunged 6.5 percent to 19.71 euros. The proposed 0.1 percent French transaction tax will apply to share purchases, including high-frequency trading, and CDS transactions, from August. Sarkozy said he expects revenue of 1 billion euros from the tax.
‘Heavy Handicap’
“A tax that’s limited to France would weigh on growth, lead to a loss of competitiveness, and create a heavy handicap for the financing of the French economy,” the French Banking Federation said in a statement on Jan. 9.
Bank of America Corp. reduced its recommendation on BNP to “underperform” from “neutral.”
Philips lost 2.2 percent to 15.24 euros as the world’s biggest lightbulb maker reported a 162 million-euro net loss in the fourth quarter. That was wider than analysts’ estimates for a loss of 25.8 million euros.
Hochtief sank 5.8 percent to 48.07 euros after saying it will report a wider loss for 2011 than it had previously anticipated because of additional charges in the fourth quarter at its Australian subsidiary and costs related to the departure of executives. The German builder said the net loss for 2011 will be about 160 million euros, compared with a previous estimate for a loss of about 100 million euros.
Kloeckner & Co. SE, Europe’s largest independent steel trader, plunged 7.3 percent to 10.85 euros after Chief Executive Officer Gisbert Ruehl forecast sliding demand for the metal in Europe this year. Steel demand in Europe may decrease 5 percent or more in 2012, Ruehl predicted in an interview with Financial Times Deutschland.
ThyssenKrupp AG (TKA) and Salzgitter AG (SZG), Germany’s biggest steelmakers, fell 3.6 percent to 21.11 euros and 5.1 percent to 45.47 euros, respectively.
ABB Ltd. (ABBN) slid 2 percent to 19.04 Swiss francs as the world’s largest maker of power-distribution equipment agreed to buy Thomas & Betts Corp. for $3.9 billion to expand its North American distribution network and add low-voltage equipment.
Source: Bloomberg
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