EUROPEAN STOCKS DROP
European Stocks Drop on Moody’s U.S. Review
QBy Adam Haigh – Jul 14, 2011 8:35 AM GMT+0100 inShare3More
Business Exchange Buzz up! Digg Print Email European and Asian stocks fell after Moody’s Investors Service said the American government may lose the Aaa credit rating it’s held since 1917. U.S. index futures were little changed.
Petrofac Ltd. (PFC), the U.K.-based oilfield services and engineering provider, declined 2.2 percent as Barclays Plc advised selling the shares. Accor SA (AC) slid 1.2 percent as rival Marriott International Inc. forecast earnings that fell below analysts’ estimates for its per-share profit.
The Stoxx Europe 600 Index sank 0.4 percent to 268.86 at 8:35 a.m. in London. Futures contracts on the Standard & Poor’s 500 Index expiring in September rose 0.2 percent to 1,315 and the MSCI Asia Pacific Index retreated 0.3 percent.
“It was hardly a surprise, although the market seems to have acted like it was,” said Ben Potter, a market strategist at IG Markets in Melbourne. “It appears the storm clouds have formed on the horizon once again.”
Moody’s put the U.S. on review for the first time since 1995 as talks to raise the country’s $14.3 trillion debt limit stall, adding to concern that political gridlock will lead to default. Even a temporary default will probably have “large systemic effects” on the economy and Treasury finances by disrupting money funds, the repurchase-agreement market and foreign investors’ willingness to buy the government’s debt, according to JPMorgan Chase & Co.
Greece’s Debt Rating
Greece’s credit rating was cut three levels to Fitch Ratings’ lowest grade for any country in the world as the company followed rivals and said that a default is a “real possibility.”
European stocks had rallied yesterday as Federal Reserve Chairman Ben S. Bernanke said he’s prepared to provide more stimulus if needed and as China’s economic growth beat estimates. The Stoxx 600 has rallied 87 percent including dividend income since March 2009 as governments and central banks from Washington to London enacted emergency stimulus measures to revive the economy.
Italy taps bond markets today as its Senate votes on budget cuts to tame a debt burden that is the second largest in Europe and has prompted investors to drive borrowing costs to a 14-year high. The treasury plans to sell as much as 5 billion euros ($7.1 billion) of four different bonds with maturities ranging from five to 15 years. It’s the first sale of longer-term debt since the country’s 10-year yield reached 6.02 percent on July 12, the highest since 1997. The yield fell from that peak after Italy successfully sold treasury bills the same day.
U.S. Earnings Season
JPMorgan Chase & Co. is among three companies in the S&P 500 that are scheduled to report earnings today.
Reports on retail sales in the U.S. and the government’s weekly claims for jobless benefits will be published before U.S. equity markets open today. Sales at U.S. retailers probably stagnated in June, reflecting declining demand for cars and rising unemployment, economists said before today’s report. Claims for jobless benefits last week dropped to 415,000 from 418,000 the previous week, according to the median forecast of economists surveyed by Bloomberg.
Germany’s Landesbank Hessen-Thueringen snubbed the European Union’s bank stress tests two days before the publication of results, refusing to give the European Banking Authority permission to publish all of its data.
Petrofac dropped 2.2 percent to 1,469 pence after the company was downgraded to “underweight” from “equal weight” at Barclays.
Accor, Intercontinental Hotels
Accor and Intercontinental Hotels Group Plc (IHG) fell 1.2 percent to 29.93 euros and 2.3 percent to 1,253 pence, respectively, after rival Marriott forecast third-quarter earnings of 25 to 29 cents per share. That fell short of analysts’ estimates for earnings per share of 30 cents.
Software AG (SOW) tumbled 13 percent to 36.55 euros for the biggest decline in the Stoxx 600 as Germany’s second-biggest maker of business software said profit in the second quarter will be little changed compared with a year earlier, while revenue declined partly due to lower license sales.
Daily Mail & General Trust Plc (DMGO) fell 2.8 percent to 427.1 pence as advertising sales declined 7 percent in the 13 weeks through July 3.
Mothercare Plc (MTC) decreased 3.6 percent to 396 pence as first- quarter U.K. comparative sales dropped 4.3 percent.
Lafarge SA (LG) gained 1.7 percent to 40.30 euros as it agreed to sell its Gypsum units to Etex Group for 1 billion euros.
source;bloomberg
