European Stocks Fall as Moody's Downgrades Italy, Spain Ratings - BusinessWeek

Feb. 14 (Bloomberg) -- European stocks declined, paring the Stoxx Europe 600 Index's biggest rally in a week, after Moody's Investors Service downgraded six euro-area countries, including Italy, Spain and Portugal. U.S. index futures and Asian shares also retreated.

ThyssenKrupp AG, Germany's biggest steelmaker, sank 3.2 percent after posting a first-quarter loss following project delays. Banco Santander SA, Spain's largest lender, fell 0.9 percent after Standard & Poor's lowered the ratings of 15 financial institutions in the country. TDC A/S, Denmark's biggest phone company, slipped 4.3 percent after private-equity investors offered shares at a discount.

The Stoxx 600 dropped 0.2 percent to 262.57 at 8:31 a.m. in London, paring yesterday's 0.7 percent rally. The benchmark measure has still advanced 7.4 percent this year amid optimism that the euro area will contain its crisis and as U.S. economic reports beat forecasts. S&P 500 futures expiring in March decreased 0.3 percent today, while the MSCI Asia Pacific Index dropped 0.4 percent.

“The fact that France is still Aaa, for now anyway, re- affirms the status of the European Financial Stability Facility,” the euro area's temporary bailout fund, said Chris Weston, an institutional trader at IG Markets in Melbourne. “One suspects only modest selling will follow.”

Italy, Spain Downgraded

Moody's said it may strip the U.K. and France of their top Aaa ratings, citing the euro area's debt crisis. Spain was downgraded to A3 from A1 yesterday, Italy to A3 from A2 and Portugal to Ba3 from Ba2, all with negative outlooks. Slovakia, Slovenia and Malta also had their ratings lowered.

Italy will sell as much as 4 billion euros ($5.3 billion) of securities expiring in 2014 today, while Spain, Greece, Belgium and the Netherlands will also auction government debt.

“Policy makers have made steps forward, but we do not think they have done enough to reassure the market that we are on a stable path,” said Alistair Wilson, chief credit officer for Europe at Moody's in London. “What will guide long-term ratings is the clarity and the performance of policy makers and the macro picture.”

In the U.S., retail sales probably rose in January by the most in four months, led by growing demand for autos, economists said before a report today. A Commerce Department report published at 8:30 a.m. in Washington will show a 0.8 percent increase, exceeding a 0.1 percent advance in December, according to the median forecast of economists surveyed by Bloomberg News.

ThyssenKrupp, Santander, BBVA

ThyssenKrupp dropped 3.2 percent to 21.20 euros after reporting a loss before interest and taxes of 33 million euros, compared with a profit of 261 million euros a year earlier.

Santander slipped 0.9 percent to 6.42 euros and Banco Bilbao Vizcaya Argentaria SA declined 1 percent to 7.07 euros after the Spanish banks were among 15 financial firms downgraded by Standard & Poor's, after the credit-ratings company reduced the nation's grade last month.

TDC slid 4.3 percent to 43.24 euros as its private-equity investors offered about 750 million euros of stock in a sale arranged by Morgan Stanley, according to transaction documents. Investors in NTC Holding GP & Cie. SCA, the consortium of buyout firms, are selling about 128 million shares, or about 15 percent of TDC, at 43.40 kroner to 43.85 kroner apiece, according to the documents. TDC won't receive any proceeds.

L'Oreal Shares Advance

L'Oreal SA gained 2.1 percent to 83.35 euros after the world's largest cosmetics maker said it's confident of achieving sales and earnings growth this year after reporting a 7.7 percent increase in 2011 operating profit, beating analysts' estimates.

L'Oreal also said that Liliane Bettencourt will leave the company's board and be replaced by her grandson Jean-Victor Meyers. Meyers, 25, studied economics and management and is a director of Tethys, the Bettencourt family holding company.

Deutsche Boerse AG added 1.6 percent to 49.58 euros after the German bourse operator posted a fourth-quarter profit amid lower costs and higher sales while announcing a stock buyback and dividend.

--Editors: Will Hadfield, Andrew Rummer

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