European Stocks Decline Amid Concern Debt Crisis May Spread

European Stocks Decline Amid Concern Debt Crisis May Spread

European Stocks Decline Amid Concern Debt Crisis May Spread

Jan 10, 2011 3:58 am ET

Jan. 10 (Bloomberg) -- European stocks retreated for a second day as concern that the region’s debt crisis may spread overshadowed a resurgence in merger activity. Asian shares and U.S. index futures fell.

Banco Comercial Portugues SA slid 5.6 percent amid reports that Portugal may be forced to seek a bailout. Danisco A/S rallied 26 percent after DuPont Co. agreed to buy the world’s largest maker of food ingredients for $5.8 billion. Smith & Nephew Plc soared 11 percent after Sky News reported the U.K. maker of hip and knee replacements rejected a 7 billion-pound ($10.9 billion) takeover approach from Johnson & Johnson.

The benchmark Stoxx Europe 600 Index lost 0.6 percent to 279.3 at 8:57 a.m. in London as four stocks fell for each one that gained. The gauge rose 1.9 percent last week after better- than-forecast manufacturing data overshadowed a weaker-than- estimated payrolls report. The measure added 8.6 percent in 2010 as companies boosted profits and the Federal Reserve unveiled $600 billion of additional bond purchases to support growth.

“Without continued bailouts we still think 2011 will be a very bad year for risk assets,” Jim Reid, a global strategist at Deutsche Bank AG in London wrote in an e-mail today. “Concern around peripheral bond supply and Portugal’s woes have added some pressure.”

Standard & Poor’s 500 Index futures expiring in March fell 0.6 percent today. The MSCI Asia Pacific excluding Japan Index slid 0.9 percent, with equity markets in Japan closed for a public holiday.

Portugal, Spain Debt

Banco Comercial Portugues, Portugal’s biggest publicly traded bank, sank 5.6 percent to 51 euro cents as the nation’s PSI-20 Index retreated 2.4 percent to the lowest level since July. Banco BPI SA dropped 4 percent to 1.26 euros.

Banco Santander SA, Spain’s largest bank, lost 1.7 percent to 7.47 euros. KBC Groep NV, Belgium’s biggest bank and insurer by market value, plunged 6.9 percent to 23.27 euros, the largest drop since June.

Portugal and Spain are scheduled to sell debt this week following a slump in euro-area government bonds last week, triggered by concern over the European Union’s ability to stem the crisis.

EU leaders may discuss expanding the 750 billion-euro ($967 billion) rescue fund for indebted nations at their next summit in February, Handelsblatt newspaper reported, citing German government officials it didn’t identify. Der Spiegel magazine said the EU could time such a pledge to coincide with granting aid to Portugal.

Danisco, Smith & Nephew

Danisco rallied 26 percent to 668.5 kroner. DuPont will pay 665 kroner ($115) a share for Danisco, according to a statement yesterday. That’s 25 percent more than Danisco’s 530-krone Jan. 7 closing share price. DuPont will also assume $500 million of Danisco’s debt.

Smith & Nephew soared 11 percent to 720 pence after Sky News Business Editor Mark Kleinman wrote Jan. 8 on his blog that J&J made an indicative offer of more than 750 pence a share several weeks before Christmas. That’s more than 15 percent above Smith & Nephew’s closing share price Jan. 7 of 650 pence. The board rejected the proposal because it “substantially undervalued” the London-based company, Kleinman wrote, without saying where he got the information.

William Morrison Supermarkets Plc advanced 1.6 percent to 274.3 pence after the smallest of the U.K.’s four main food retailers said sales over the Christmas period rose as shoppers defied heavy snow to stock up on groceries for the holiday.

Bulgari SpA advanced 2.3 percent to 7.87 euros as BofA Merrill Lynch Global Research raised its recommendation on the shares to “buy” from “neutral.”

--Editors: Andrew Rummer, Jason Carey.

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