European stocks fell for a second day as concern grew that the region’s debt crisis will spread to Italy and China’s inflation surged to a three-year high. Asian shares and U.S. index futures slid.
Intesa Sanpaolo SpA (ISP) retreated as Italy’s second-biggest bank was downgraded at HSBC Holdings Plc. British Sky Broadcasting Group Plc (BSY) tumbled to an eight-month low as U.K. Culture Secretary Jeremy Hunt was said to be preparing to ask regulators for additional advice on News Corp.’s proposed takeover. Northumbrian Water Group Plc (NWG) jumped 5.1 percent after receiving a 2.4 billion-pound ($3.8 billion) bid.
The Stoxx Europe 600 Index fell 0.6 percent to 272.03 at 11:31 a.m. in London. The gauge slipped 0.4 percent last week as speculation increased that the region’s debt crisis will spread and a report showed U.S. employers added fewer workers than forecast, fueling speculation the economic recovery is slowing. The measure has fallen for 9 weeks out of the past 10, bringing its drop since this year’s high on Feb. 17 to 6.6 percent.
“What we’re seeing today is the result of 20 to 30 years of Western countries living beyond their means,” said Matthieu Giuliani, a fund manager at Palatine Asset Management in Paris, which oversees $5 billion. “We pulled on the thread a bit and everyone is naked underneath. I’m cautious on stocks. Emerging markets were the final motor. If we have to slow down that machine, that motor will be removed.”
Futures on the Standard & Poor’s 500 Index sank 0.9 percent today and the MSCI Asia Pacific Index dropped 1.2 percent.
European Union President Herman van Rompuy and European Commission President Jose Manuel Barroso are holding talks today with European Central Bank President Jean-Claude Trichet, Luxembourg Prime Minister Jean-Claude Juncker and European Economic Commissioner Olli Rehn ahead of a meeting of euro-area finance ministers starting at 2:45 p.m. in Brussels.
The euro-region’s bailout fund may have to be doubled to 1.5 trillion euros ($2.1 trillion) to cover a crisis in Italy, the ECB said, German newspaper Die Welt said, citing unidentified “high ranking” people at central banks. European leaders are prepared to accept that Greece should default on some of its bonds as part of a new bailout plan for the country that would put its total debt levels on a sustainable footing, the Financial Times reported, citing unnamed senior officials.
China’s inflation accelerated to the fastest pace in three years in June, highlighting the challenge for policy makers of sustaining growth while taming prices. The consumer price index increased 6.4 percent, the National Bureau of Statistics said on July 9, exceeding the 6.2 percent median estimate of economists surveyed by Bloomberg News.
Alcoa Inc. (AA), the largest U.S. aluminum producer, will become the first company in the Dow Jones Industrial Average to report quarterly earnings after the close of New York trading today. Profits at S&P 500 companies are projected to have gained 13 percent in the second quarter, the smallest increase in two years, according to analyst estimates compiled by Bloomberg.
Intesa Sanpaolo lost 2.7 percent to 1.61 euros as the Italian lender was downgraded to “neutral” from “overweight” at HSBC.
Italy’s financial-market regulator moved to curb short selling after the country’s benchmark stock index fell the most in almost five months on July 8 and bonds tumbled on investor concern Italy would be the next victim of Europe’s debt crisis.
Italy Short Sales
The regulator, known as Consob, ordered last night that short sellers must reveal their positions when they reach 0.2 percent or more of a company’s capital and then make additional filings for each additional 0.1 percent. The measure takes effect today and lasts until Sept. 9.
ING Groep NV (INGA) slipped 3.9 percent to 8.07 euros. The Netherlands plans to guarantee the stability of the country’s biggest banks by ensuring that different units can be separated in times of crisis. The government said it favors making the banks safer as whole entities, rather than splitting them now.
Bank of Ireland Plc retreated 9.5 percent to 11 euro cents. Ireland’s largest lender said it plans to raise 1.9 billion euros in a share sale as it seeks to raise capital and avoid state control.
National Bank of Greece SA (ETE) lost 4.7 percent to 4.46 euros and Commerzbank AG (CBK), Germany’s second-largest lender, slid 3.7 percent to 2.86 euros. Societe Generale (GLE) SA, France’s second- biggest bank by market value, retreated 3.6 percent to 37.13 euros.
CA Cheuvreux said it expects second-quarter net income at the 31 largest European banks it covers to fall 19 percent from the first quarter. The yield spreads investors demand to hold Italian, Portuguese and Spanish bonds over German bunds widened to euro-era records.