Xstrata Plc fell 4.8 percent, leading mining stocks lower. Deutsche Bank AG, Germany’s biggest lender, slid 3.6 percent. ING Groep NV retreated 1.4 percent. Deutsche Lufthansa AG dropped as a cloud of ash from an Icelandic volcano forced the cancellation of flights in northern Europe. Royal Bank of Scotland Group Plc rose after Bank of America Merrill Lynch said the lender may return to profit this year.
The Stoxx Europe 600 Index slipped 0.7 percent to 267.81 this week, its biggest drop since February, after a sell-off in the last hour of trading as the Securities and Exchange Commission accused Goldman Sachs and one of its vice presidents of defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages.
“There is hardly any room for negative surprises such as the SEC charge at Goldman Sachs,” said Ineke Valke, and Amsterdam-based strategist at Theodoor Gilissen Bankiers, which manages about $7 billion. “Markets will now probably enter a period of moving sideways until there is some confirmation on economic recovery in the longer term. Momentum seems to have passed.”
Aid Package
The Stoxx 600 has climbed 5.5 percent this year as the European Union agreed a $61 billion aid package to help Greece tackle the region’s biggest budget deficit and the U.S. Federal Reserve pledged to maintain record-low interest rates for an extended period to secure the economic recovery.
National benchmark indexes decreased in 12 of the 18 western European markets. Germany’s DAX fell 1.1 percent and France’s CAC 40 retreated 1.6 percent. The U.K.’s FTSE 100 decreased 0.5 percent. Greece’s ASE added 0.2 percent, paring two weeks of losses.
The Stoxx 600 dropped for the first two months of 2010 amid concern that Greece, Portugal and Spain will struggle to rein in their budget deficits.
Euro-region finance ministers agreed a rescue package for Greece last weekend after the nation’s borrowing costs surged to an 11-year high. They said they would offer as much as 30 billion euros ($40.5 billion) in three-year loans in 2010 at below market rates. Another 15 billion euros would come from the International Monetary Fund.
Yields Rise
EU finance ministers meeting in Madrid on April 16 said Greece doesn’t have an immediate plan to trigger the rescue package even as the country’s bond yields rose to the highest since before the bailout plan was announced.
Greek Prime Minister George Papandreou asked for a meeting with the EU, the IMF and the European Central Bank. Talks will begin in Athens on April 19.
EFG Eurobank Ergasias SA, Greece’s second biggest lender, added 3.1 percent while Pireaus Bank SA gained 4.9 percent.
In the U.S., the Federal Reserve on April 14 said in its Beige Book business survey that the economy expanded “somewhat” across most of the U.S. in March as consumer spending and manufacturing improved, signaling the recovery is broadening without gaining much speed.
Sales at U.S. retailers climbed in March more than anticipated, signaling consumers will play a bigger role in a broadening economic recovery. Purchases increased 1.6 percent last month, the most in four months, and gains for February and January were revised up, Commerce Department figures showed April 14. Sales excluding autos rose 0.6 percent, also surpassing expectations.
U.S. Confidence
The Reuters/University of Michigan preliminary U.S. consumer sentiment index fell to 69.5 in April, the lowest level in five months, indicating Americans are discouraged about the labor market. Economists had projected the sentiment index would rise to 75, according to the median of 69 economists in a Bloomberg News survey.
The first-quarter earnings season began in the U.S. this week, with analysts predicting combined profit for S&P 500 companies increased 30 percent from a year earlier, according to estimates compiled by Bloomberg. For Europe’s Stoxx 600, earnings will climb 45 percent in 2010, the data show.
China Growth
China’s growth accelerated to the fastest pace in almost three years in the first quarter, increasing speculation that the government may move to cool the economy. Gross domestic product rose 11.9 percent from a year earlier, the country’s statistics bureau reported on April 15, topping the median 11.7 percent estimate in a Bloomberg News survey of economists. [bn:WBTKR=DBK:GY] Xstrata, the world’s fourth-largest copper producer, slipped 4.8 percent. Basic-resources stocks retreated as Alcoa Inc. reported earnings that disappointed investors and China increased down- payment ratios for some home purchases, saying “more forceful” steps are needed to cool speculation. BHP Billiton Plc, the world’s biggest mining company, slid 4 percent.
Deutsche Bank [] slipped 3.6 percent while ING, the Netherlands’ biggest financial-services company, decreased 1.4 percent. Societe Generale SA, France’s second-biggest lender, fell 2.8 percent.
Airlines dropped as a cloud of ash from a volcano in Iceland shut airports in northern Europe. Deutsche Lufthansa AG, Europe’s second-biggest airline, fell 2.5 percent. British Airways Plc tumbled 5.2 percent.
Royal Bank of Scotland Group Plc soared 8.1 percent after an analyst at Bank of America Merrill Lynch said Britain’s biggest government-owned bank may return to profit this year.
“RBS is one of the most geared banks into recovery in Europe,” wrote Michael Helsby. “We think it can turn a profit in 2010 and that profitability can recover strongly thereafter driven by rising margins, tight cost control and falling bad debts.”
