Tags: Europe | stocks | decline | Cyprus

Europe Stocks Post Biggest Weekly Drop Since November on Cyprus

Friday, 22 Mar 2013 01:48 PM

 

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European stocks posted the biggest weekly decline in four months as a proposal to impose a levy on bank deposits in Cyprus sparked concern it would set a precedent for other euro-area economies seeking aid.

National Bank of Greece SA and Banco Popular Espanol SA paced losses among lenders. Lanxess AG tumbled 11 percent after predicting a drop in profit this quarter. Barratt Developments Plc and Persimmon Plc pushed U.K. homebuilders higher after Britain announced a new plan to support housing.

The benchmark Stoxx Europe 600 Index fell 1.1 percent to 294.04 this week, the biggest drop since Nov. 16. The measure has still gained 5.1 percent so far this year as U.S. lawmakers agreed on a compromise budget and reports on housing and jobs fueled optimism the world’s largest economy is recovering.

“The capacity for European stock markets to outperform strongly during 2013 has been dealt a blow by the reminder that European tail risks can flare up quickly and knock investor confidence,” John Bilton, European investment strategist at Bank of America Corp.’s Merrill Lynch unit, wrote in a note. Without “a quick resolution to the crisis and a clear statement from policy makers that Cyprus is unique, there is likely to be a lingering impact on confidence,” he added.

National benchmark indexes retreated in all 18 western European markets this week, except Ireland. The U.K.’s FTSE 100 fell 1.5 percent. France’s CAC 40 slid 1.9 percent and Germany’s DAX Index slipped 1.6 percent. Greece’s ASE Index tumbled 3.1 percent, while the stock market in Cyprus was closed all week.

Unprecedented Levy

Cypriot President Nicos Anastasiades on March 16 agreed to a demand by the euro area’s finance ministers to raise 5.8 billion euros ($7.5 billion) by imposing a charge on every bank account in the country.

Cyprus’s parliament rejected the levy on March 19, setting up a showdown with the European policy makers who insisted on a contribution from the island nation as a condition for the release of 10 billion euros of emergency loans.

The European Central Bank has said it will withdraw Cypriot lenders’ access to liquidity after March 25 unless the government agrees to a bailout from the European Union and the International Monetary Fund.

Cyprus didn’t get the loans it sought from Russia, although the two countries will continue talking, the island nation’s finance minister, Michael Sarris, said.

German Manufacturing

A purchasing managers’ index for German manufacturing unexpectedly fell to 48.9 this month, a report showed on March 21. The median economist forecast had called for 50.5, according to a Bloomberg News survey. A reading below 50 signals a contraction. A separate report showed manufacturing in France shrank more than estimated.

A gauge of bank shares was the second-worst performer among 19 industry groups in the Stoxx 600 this week. National Bank of Greece lost 8.1 percent. Banco Popular slipped 12 percent. Banco de Sabadell SA slumped 9.8 percent, while Barclays Plc slid 8.8 percent.

Lanxess plunged 11 percent after saying earnings before interest, taxes, depreciation, amortization and one-time items will drop to as low as 160 million euros in the current quarter, from 369 million euros a year earlier. The chemical maker also said it has budgeted for declining profit this year.

Mining Shares

Rio Tinto Group retreated 6.1 percent after the world’s second-biggest mining company on March 19 forecast a decline in iron-ore prices from the second half of the year.

An index of mining companies posted the biggest drop on the Stoxx 600. Kazakhmys Plc plummeted 13 percent and Lonmin Plc plunged 9.3 percent.

In the U.K., homebuilders rallied after Chancellor of the Exchequer George Osborne on March 20 announced a new Help-to-Buy program to support the housing industry. He committed 3.5 billion pounds ($5.3 billion) to help first-time buyers purchase newly built houses and offered guarantees sufficient to support 130 billion pounds of mortgages.

Persimmon surged 8 percent and Barratt Developments jumped 9.8 percent. Taylor Wimpey Plc climbed 6.1 percent.

Ryanair Holdings Plc advanced 6.9 percent after saying March 19 it is buying 175 jets with a catalog value of $15.6 billion from Boeing Co. The additional flights will allow the budget airline to boost traffic to more than 100 million passengers by March 2019, according to a joint statement by the two companies.

© Copyright 2014 Bloomberg News. All rights reserved.

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