European stocks slid, halting a four-day rally for the Stoxx Europe 600 Index, as investors speculated that Greece may not receive an aid payment that would help it avoid default.
Deutsche Bank AG (DBK) led banks lower after Germany’s ruling party lost another regional election. Mining companies and oil producers fell as base metals and crude oil dropped, while Michelin & Cie. declined after Morgan Stanley downgraded the tiremaker.
The benchmark Stoxx 600 dropped 2.3 percent to 224.96 at the 4:30 p.m. close in London, paring last week’s 2.5 percent advance. The gauge has declined 23 percent from this year’s peak on Feb. 17 as the region’s growing debt crisis added to concern that the economic recovery is at risk.
“Politically, there is a will for Greece to make its next payment,” said Sailesh Bhundia, senior portfolio manager at EFG Asset Management in London, which oversees about $6 billion. “When you look at the ability of the Greeks to meet some of these austerity measures, you have to ask questions.”
Stocks rallied around the world last week after Germany and France said Greece will remain a euro member and the European Central Bank announced coordinated measures with the Federal Reserve to ensure the region’s lenders have sufficient U.S. dollars.
National benchmark indexes declined in every western European market. France’s CAC 40 Index fell 3 percent, the U.K.’s FTSE 100 Index dropped 2 percent and Germany’s DAX Index lost 2.8 percent.
Greece Debt Talks
In Greece, international monitors will assess whether Prime Minister George Papandreou can meet the conditions of the country’s rescue loans. The Greek leader canceled a U.S. visit that was to begin yesterday, saying he needed to remain in the country for a “critical” seven days.
European Union and International Monetary Fund inspectors hold a teleconference today with Greece’s Finance Minister, Evangelos Venizelos, to judge whether the government is eligible for an aid payment due in October.
Greece “has sufficient cash to keep going until mid October, but with this deadline fast approaching, it’s perhaps no surprise that many will start looking at ways to take risk out of portfolios and it’s no surprise that financial stocks are already feeling the squeeze,” said Cameron Peacock, a market analyst at IG Markets in Melbourne.
Merkel Loses Election
Separately, German Chancellor Angela Merkel’s party lost a regional election in Berlin, the last of seven state ballots this year in which voters have punished the governing coalition parties for their handling of the sovereign-debt crisis.
Deutsche Bank and Commerzbank AG (CBK), Germany’s largest lenders, led a gauge of European bank shares lower, falling 4.5 percent to 23.96 euros and 4.1 percent to 1.69 euros, respectively.
Societe Generale (GLE) SA, which was downgraded by Moody’s on Sept. 14, sank 6.7 percent to 17.69 euros. Credit Suisse Group AG declined 6.2 percent to 21.31 euros.
Lloyds Banking Group Plc slumped 6.7 percent to 33.42 pence as the bank said Finance Director Tim Tookey will leave the U.K.’s largest mortgage lender to join Friends Life, the insurer being built by Resolution Ltd., Clive Cowdery’s acquisition firm.
BHP Billiton Ltd. (BHP) slipped 3.4 percent to 1,935 pence, Rio Tinto Group declined 3.3 percent to 3,505 pence and Antofagasta Plc tumbled 8.2 percent to 1,194 pence as base metals retreated in London. Total SA retreated 1.8 percent to 32.16 euros and BP Plc slipped 1.5 percent to 407.4 pence as crude oil fell to near its lowest price in two weeks.
Bets on Commodities
Hedge funds cut their bullish bets on raw materials for the first time in five weeks on speculation that demand will decline as Europe’s debt crisis deepens.
In the week ended Sept. 13, speculators lowered their net- long positions in 18 commodities by 5.2 percent to 1.21 million futures and options contracts, government data compiled by Bloomberg show. That was the first drop since early August.
Michelin sank 6 percent to 45.53 euros after Morgan Stanley lowered its recommendation for the world’s second-largest tiremaker to “underweight” from “overweight.”
Temenos Group AG (TEMN) dropped 7.4 percent to 14.35 francs after Morgan Stanley downgraded the banking-software maker to “equal weight” from “overweight.”
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