Financials lead values lower on Moody's move

Eurostoxx 50: 2,832.63 (-17.88) Frankfurt DAX: 7,431.19 (-8.25) Paris CAC: 3,961.34 (-17.49)EUROPEAN STOCKS declined, halting a seven-day rally, as China raised interest rates and Moody's Investors Service cut Portugal's credit rating to junk.

Banco Espirito Santo SA and Banco Comercial Portugues SA led Portuguese banks lower, sliding more than 5 per cent. Carlsberg A/S, the owner of Russia’s biggest brewer, dropped 4.4 per cent after a report that the nation may tighten regulation of alcoholic-drink sales. Scor SE, France’s largest reinsurer, lost 3.1 per cent.

Greece’s bondholders met with officials in Paris yesterday to discuss a proposed rollover of the nation’s debt as EU leaders insist that private investors contribute to a new aid package for Greece. Germany revived a plan for a voluntary debt swap to lengthen Greek bond maturities, underscoring how investors and government officials are struggling to devise a role for creditors in a bailout without triggering a default.

Moody’s downgraded Portugal’s credit rating to Ba2 as the nation joined Greece with a non-investment grade rating.

Portuguese Banks Banco Espirito Santo, Portugal’s biggest publicly traded bank by market value, slumped 5.7 per cent to €2.46 while Banco Comercial Portugues, the second largest, sank 6.9 per cent to 36.7cent. UniCredit SpA, Italy’s biggest bank, dropped 7.1 per cent to €1.40, the largest decline in more than a year. Spain’s Banco Santander SA retreated 2.1 per cent to €7.85.

“The fear of contagion to much bigger economies than the Greek one looms, as Spain and Italy face elevated debt levels and bleak economic outlook,” said Anita Paluch, a sales trader at ETX Capital in London. Carlsberg sank 4.4 per cent to 545 kroner after Vedomosti reported the Russian government may ban sales of drinks containing more than 0.5 per cent alcohol at night and in kiosks.

Scor retreated 3.1 per cent to €18.95, the biggest decline since May. The reinsurer said it is boosting its capital as it draws €75 million from a natural catastrophe financial coverage facility provided by UBS AG since the start of the year.

Smith and Nephew, Europe’s largest maker of shoulder and knee implants, climbed 1.7 per cent to 684p amid takeover speculation in the industry. – (Bloomberg)