Most European Stocks Fall on Concern IMF May Withhold Greek Aid

May 26, 2011, 12:27 PM EDT By Giles Broom

May 26 (Bloomberg) -- Most European stocks retreated after the head of the group of euro-area finance ministers said the International Monetary Fund may not release its portion of an aid payment to Greece next month.

UniCredit SpA, Italy’s biggest bank, and Banco Espirito Santo SA, Portugal’s largest by market value, both lost more than 2 percent. Burberry Group Plc, the U.K.’s biggest luxury retailer, tumbled 4.6 percent. Man Group Plc jumped 2.5 percent after the world’s biggest publicly traded hedge fund manager said profit fell less than it had previously forecast and client assets increased.

The Stoxx 600 declined 0.1 percent to 277.14 at the 4:30 p.m. close in London as three stocks fell for every two that climbed. The gauge has risen 5.7 percent from this year’s low on March 16 as investors speculated that company profits and government stimulus measures will keep the economic recovery on track.

“Should Greece default, it is a problematic scenario for risky assets and for the financial system,” said Thomas Steinemann, chief strategist at Vontobel Holding AG in Zurich, whose team helps oversee about $80 billion. “It’s a story killer.”

National benchmark indexes dropped in 16 out of 18 West European countries today. The U.K.’s FTSE 100 Index climbed 0.2 percent and France’s CAC 40 Index lost 0.3 percent. Germany’s DAX Index slumped 0.8 percent. The Euro Stoxx 50 Index for companies in the euro area fell 0.5 percent to 2,797.

Juncker Speaks

European stocks consolidated their losses as Jean-Claude Juncker, who leads the euro area’s group of finance ministers, said that the IMF may withhold its 3.3 billion-euro ($4.7 billion) contribution to the 12 billion-euro payment that Greece had expected to receive next month.

“There are specific IMF rules and one of those rules says that IMF can only take action when the refinancing guarantee is given over 12 months,” Juncker said at a conference in Luxembourg. “I don’t think that the troika will come to the conclusion that this is given,” he said.

UniCredit retreated 2.9 percent to 1.52 euros. Espirito Santo declined 2.3 percent to 2.72 euros. The cost to insure Greek sovereign debt rose 7 basis points to 1,424, according to CMA prices for credit-default swaps. That signals a 69 percent chance of default within five years.

U.S. Economic Growth

The U.S. economy grew at a 1.8 percent annual rate in the first quarter, less than economists had forecast, reflecting a smaller gain in consumer spending than previously calculated.

The revised increase in gross domestic product was the same as the U.S. Commerce Department estimated last month and compared with a 3.1 percent gain in the prior quarter. The median projection of economists surveyed by Bloomberg News called for a 2.2 percent increase.

Federal Reserve Bank of Minneapolis President Narayana Kocherlakota yesterday trimmed his forecast for U.S. economic growth and slightly raised his outlook for unemployment, while reiterating his call for higher interest rates this year.

Kocherlakota predicted unemployment of “close to 8.5 percent” at year’s end, in a speech in Rochester, Minnesota, an estimate contrasting with “between 8 percent and 8.5 percent” in a May 11 speech. He estimated that the economy will grow “around 3 percent,” compared with “between 3 percent and 3.5 percent.”

Burberry Shares Slip

Burberry sank 4.6 percent to 1,260 pence as the company said that its operating margin will probably fall in the first six months of the fiscal year. Burberry, which is best known for its plaid-lined trench coats, also reported that full-year adjusted pretax profit rose 39 percent to 298 million pounds ($487 million). That beat the 292.8 million-pound average estimate of six analysts surveyed by Bloomberg.

“The level of investment is expected to weigh on first- half margins,” Katherine Wynne and David Jeary, analysts at Investec Plc, wrote in a note to clients today. “After a strong run, the shares may pause for breath, but we remain buyers for the sustainable growth story.” Burberry has soared 13 percent this year, while the FTSE 100 Index has failed to advance more than 0.1 percent.

Vestas Wind Systems A/S, the largest wind-turbine manufacturer, slumped 5.8 percent to 145.60 kroner. Jim Chanos, the short seller known for predicting Enron Corp.’s collapse, said investors should bet against the stock. The company “will be under financial strain and best avoided,” Chanos said yesterday at the Ira Sohn Conference in New York after European markets had closed.

SIG, Man Group

SIG Plc sank 2.2 percent to 148.1 pence after BofA Merrill Lynch cut its rating on the shares to “underperform” from “neutral.”

Bayer AG fell 1.9 percent to 54.71 euros after UBS AG cut its recommendation on the maker of aspirins to “neutral” from “buy,” citing valuation and “less positively skewed” near- term catalysts for the company’s Xarelto blood-thinner.

Man Group jumped 2.5 percent to 245 pence after saying full-year pretax profit from continuing operations dropped to $324 million from $541 million a year earlier. That beat Man’s March forecast for pretax profit of $280 million. Funds under management totaled $71 billion, up from $69.1 billion at the end of March, Man said.

Nobel Biocare rallied 6.3 percent to 18.65 Swiss francs, its biggest jump in 18 months, after Morgan Stanley raised the stock to “overweight” from “underweight.” The brokerage predicted that dental implant sales will accelerate.

Weir, Hellenic Telecommunications

Weir Group Plc, the Glasgow-based engineering company, rallied 5.3 percent to 1,984 pence, its highest price since at least 1989.

“We still remain positive in respect of Weir’s outlook,” Andrew Douglas, an analyst at Royal Bank of Scotland Group Plc in London, wrote in a note to clients late yesterday. “The shale story has a long way to go, in our view, both in North America and on a global scale, and we expect Weir to be a strong beneficiary of this future growth.”

Hellenic Telecommunications Organization SA climbed 4.8 percent to 7 euros after website Euro2day reported that Greece’s government will sell a 10 percent stake in the company to Deutsche Telekom AG within the next few days. Euro2day didn’t say how it got the information.

Elan Corp. gained 2.1 percent to 6.31 euros, its highest price since February 2009. The Irish drugmaker will probably do another licensing deal in the next six months, Chief Executive Officer Kelly Martin said after the close of trading yesterday.

Antofagasta Plc, the copper producer controlled by Chile’s Luksic family, advanced 3.5 percent to 1,258 pence after saying first-quarter profit rose 30 percent as output grew and prices climbed to a record.

--With assistance from Alexis Xydias in London. Editors: Will Hadfield, Mark Gilbert

To contact the reporter on this story: Giles Broom in Zurich at gbroom@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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