European stocks fell the most in two weeks as concern grew that the region’s debt crisis will spread to Italy and China’s inflation surged to a three-year high. Asian shares and U.S. index futures slid.
Intesa Sanpaolo SpA (ISP), Italy’s second-biggest bank, led the FTSE MIB Index to the biggest two-day drop in 14 months. British Sky Broadcasting Group Plc (BSY) tumbled to a nine-month low as U.K. Culture Secretary Jeremy Hunt asked regulators for additional advice on News Corp.’s proposed takeover. Northumbrian Water Group Plc (NWG) jumped 5.1 percent after receiving a 2.4 billion-pound ($3.8 billion) bid.
The Stoxx Europe 600 Index lost 1.2 percent to 270.39 at 1:39 p.m. in London. The gauge slipped 0.4 percent last week as speculation increased that the region’s debt crisis will spread and a report showed U.S. employers added fewer workers than forecast, fueling speculation the economic recovery is slowing. The measure has fallen for 9 weeks out of the past 10, bringing its drop since this year’s high on Feb. 17 to 7.1 percent.
“What we’re seeing today is the result of 20 to 30 years of Western countries living beyond their means,” said Matthieu Giuliani, a fund manager at Palatine Asset Management in Paris, which oversees $5 billion. “We pulled on the thread a bit and everyone is naked underneath. I’m cautious on stocks. Emerging markets were the final motor. If we have to slow down that machine, that motor will be removed.”
Futures on the Standard & Poor’s 500 Index sank 1.3 percent today and the MSCI Asia Pacific Index dropped 1.1 percent.
EU Meetings
European Union President Herman van Rompuy and European Commission President Jose Manuel Barroso are holding talks today with European Central Bank President Jean-Claude Trichet, Luxembourg Prime Minister Jean-Claude Juncker and European Economic Commissioner Olli Rehn ahead of a meeting of euro-area finance ministers starting at 2:45 p.m. in Brussels.
The euro-region’s bailout fund may have to be doubled to 1.5 trillion euros ($2.1 trillion) to cover a crisis in Italy, German newspaper Die Welt reported, citing unidentified “high ranking” people at central banks. European leaders are prepared to accept that Greece should default on some of its bonds as part of a new bailout plan for the country that would put its total debt levels on a sustainable footing, the Financial Times said, citing unnamed senior officials.
Chinese Inflation
China’s inflation accelerated to the fastest pace in three years in June, highlighting the challenge for policy makers of sustaining growth while taming prices. The consumer price index increased 6.4 percent, the National Bureau of Statistics said on July 9, exceeding the 6.2 percent median estimate of economists surveyed by Bloomberg News.
Alcoa Inc. (AA), the largest U.S. aluminum producer, will become the first company in the Dow Jones Industrial Average to report quarterly earnings after the close of New York trading today. Profits at S&P 500 companies are projected to have gained 13 percent in the second quarter, the smallest increase in two years, according to analyst estimates compiled by Bloomberg.
Italy’s FTSE MIB retreated 3 percent and Portugal’s PSI-20 Index fell 3.1 percent for the biggest losses among the 18 western European benchmarks.
Intesa Sanpaolo lost 5.9 percent to 1.56 euros as the Italian lender was downgraded to “neutral” from “overweight” at HSBC Holding Plc. Fiat SpA (F) tumbled 4.7 percent to 6.91 euros as the automaker was cut to “sell” at Societe Generale (GLE) SA. Fiat Industrial SpA, a maker of trucks and tractors, sank 6 percent to 7.85 euros.
Azimut, Parmalat
Azimut Holding SpA (AZM), which offers investment management services, sank 5 percent to 5.44 euros. Parmalat SpA (PLT), a milk producer, slid 5 percent to 2.38 euros.
Italy’s financial-market regulator, known as Consob, ordered last night that short sellers must reveal their positions when they reach 0.2 percent or more of a company’s capital and then make additional filings for each additional 0.1 percent. The measure takes effect today and lasts until Sept. 9.
ING Groep NV (INGA) slipped 6 percent to 7.89 euros. The Netherlands plans to guarantee the stability of the country’s biggest banks by ensuring that different units can be separated in times of crisis. The government said it favors making the banks safer as whole entities, rather than splitting them now.
Bank of Ireland Plc retreated 9.5 percent to 11 euro cents. Ireland’s largest lender said it plans to raise 1.9 billion euros in a share sale as it seeks to raise capital and avoid state control.
Banks Drop
National Bank of Greece SA (ETE) lost 4.1 percent to 4.49 euros and Commerzbank AG (CBK), Germany’s second-largest lender, slid 5.6 percent to 2.80 euros. Societe Generale, France’s second-biggest bank by market value, retreated 4.9 percent to 36.63 euros.
CA Cheuvreux said it expects second-quarter net income at the 31 largest European banks it covers to fall 19 percent from the first quarter. The yield spreads investors demand to hold Italian, Portuguese and Spanish bonds over German bunds widened to euro-era records today.
BSkyB tumbled 6.2 percent to 703.5 pence, the lowest level since October, as Hunt asked regulators for additional advice following a phone-hacking scandal at the bidder’s News of the World tabloid. Allegations last week that a News of the World employee intercepted messages left on murdered schoolgirl Milly Dowler’s mobile phone caused a public outcry and prompted Prime Minister David Cameron to pledge an independent inquiry.
BSkyB Advice
Hunt said he wants the “independent advice” of Ofcom and the Office of Fair Trading before reaching his decision. Speaking to BBC television, Hunt said he had written to the regulators to ask whether recent information, including the disclosure of out-of-court settlements to victims of phone- hacking, “should have any bearing on the decision I take.”
Voestalpine AG (VOE) sank 3.7 percent to 36.30 euros after a report that Austria’s biggest steelmaker may lose German whistleblower protection against possible prosecution for antitrust violations.
Northumbrian Water jumped 5.1 percent to 448.10 pence after the utility received a 465 pence-a-share takeover proposal from Li Ka-shing’s Cheung Kong Infrastructure Holdings Ltd.
International Power Plc (IPR) advanced 2.8 percent to 309.6 pence. The energy utility said the Australian government’s proposed climate change plans would be important to its Australian operations and employees but are not expected to be material to the entire group.
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