European stocks declined, halting a seven-day rally, as Moody’s Investors Service downgraded Portugal’s credit rating to junk and China raised interest rates. Asian shares gained and U.S. index futures fell.
Banco Espirito Santo SA (BES) and Banco Comercial Portugues SA (BCP) led Portuguese banks lower, sliding more than 3 percent. Amadeus IT Holding SA (AMS) lost 1.1 percent after Cinven Ltd. and BC Partners Ltd. sold a stake in the flight-reservations provider. Adecco SA (ADEN) gained as JPMorgan Chase & Co. upgraded the world’s largest supplier of temporary workers.
The benchmark Stoxx Europe 600 Index fell 0.3 percent to 274.74 at 11:55 a.m. in London, ending the longest winning streak in two months. The gauge had surged 4.4 percent over the previous seven days as Greek lawmakers passed a five-year austerity package, qualifying the country for further European Union aid. The measure has still fallen 5.7 percent from its February high amid speculation the region’s fiscal crisis will derail the economic recovery.
“There’s concern from some people that China is pushing the brakes on economic growth a little too hard,” said Richard Hunter, head of U.K. equities at Hargreaves Lansdown Plc in London. “We’ve by no means solved Europe’s debt problem and that is going to need to be revisited again soon.”
Paris Meeting
Greece’s bondholders are meeting with officials in Paris today to discuss a proposed rollover of the nation’s debt. EU leaders are insisting that private investors contribute to a new aid package for Greece after last year’s 110 billion-euro ($159 billion) rescue failed to stop the spread of the region’s debt crisis.
The MSCI Asia Pacific Index increased 0.3 percent today and Standard & Poor’s 500 Index futures slipped 0.4 percent.
Stocks extended losses as China raised benchmark interest rates for the third time this year after inflation accelerated to the fastest pace since July 2008. The one-year deposit rate will rise to 3.5 percent from 3.25 percent from tomorrow, the People’s Bank of China said. The one-year lending rate will increase to 6.56 percent from 6.31 percent.
Service industries in the U.S. probably expanded at a slower pace in June, showing the expansion cooled at the end of the first half of 2011, economists said before a report due at 10 a.m. New York time today.
The Institute for Supply Management’s non-manufacturing index fell to 53.7 last month from 54.6 in May, according to the median estimate in a Bloomberg News survey. Readings greater than 50 signal expansion. Other data today include the Mortgage Bankers Association’s mortgage-approvals release and Challenger, Gray & Christmas Inc.’s report on job cuts.
German Factory Orders
In Germany, a report showed factory orders unexpectedly increased in May, led by domestic demand for investment goods such as machinery. Orders, adjusted for seasonal swings and inflation, increased 1.8 percent from April, when they surged a revised 2.9 percent, the Economy Ministry in Berlin said. Economists had forecast a drop of 0.5 percent, according to the median of 33 estimates in a Bloomberg News survey.
Banking shares had the worst performance among 19 industry groups in the Stoxx 600, led by declines in Portuguese lenders. Moody’s downgraded Portugal’s credit rating to Ba2 late yesterday as the nation joined Greece as the second euro-region country with a non-investment grade rating.
“Portugal’s credit downgrade is definitely the news spoiling the atmosphere today,” said Matthias Jasper, head of equities at WGZ Bank AG in Dusseldorf. “We’re going to see a small setback, but the environment for equities is still positive.”
Portuguese Banks Fall
Banco Espirito Santo, Portugal’s biggest publicly traded bank by market value, slumped 3.6 percent to 2.51 euros while Banco Comercial Portugues, the second-largest, sank 5.8 percent to 37.1 euro cents.
UniCredit SpA (UCG), Italy’s biggest bank, dropped 4.8 percent to 1.43 euros and Spain’s Banco Santander SA (SAN) retreated 2.5 percent to 7.82 euros.
“The fear of contagion to much bigger economies than the Greek one looms, as Spain and Italy face elevated debt levels and bleak economic outlook,” said Anita Paluch, a sales trader at ETX Capital in London.
Amadeus fell 1.1 percent to 13.99 euros in Madrid after Cinven and BC Partners sold a 9.16 percent stake for 13.90 euros a share.
Scor Slips
Scor SE (SCR) lost 3.4 percent to 18.89 euros, the biggest drop since March. France’s largest reinsurer said it is boosting its capital as it draws 75 million euros from a natural-catastrophe financial coverage facility provided by UBS AG since the start of the year.
Digital Multimedia Technologies SpA (DMT) and Mediaset SpA (MS) fell 1.8 percent to 20.14 euros and 2.9 percent to 3.16 euros, respectively. Merger talks between Digital Multimedia and Mediaset’s Elettronica Industriale SpA broadcast tower unit are at risk after minority shareholders of DMT rejected an investment plan, Il Sole 24 Ore reported, without saying where it got the information.
Adecco advanced 1.1 percent to 55.7 Swiss francs as JPMorgan upgraded the shares to “overweight” from “underweight.”
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