European stocks slid, extending the Stoxx Europe 600 Index’s biggest monthly drop in more than a year, as the rate of manufacturing expansion in China and Europe slowed. Asian shares and U.S. index futures fell.
BP Plc slumped the most in 18 years after Europe’s second- biggest oil company abandoned efforts to plug a leaking Gulf of Mexico well. Boliden AB led basic-resources producers lower as copper retreated on the London Metal Exchange. Prudential Plc advanced 3.9 percent on speculation its takeover of American International Group Inc.’s main Asian unit won’t proceed.
The Stoxx 600 declined 1.8 percent to 240.62 at 12 p.m. in London as all 19 industry groups retreated. The gauge slumped 5.8 percent in May, the biggest monthly drop since February 2009, amid concern that Europe’s debt crisis will hurt the economic recovery. U.S. and U.K. markets were closed for public holidays yesterday.
“Chinese manufacturing data is another sign showing the global economy is cooling down,” said Markus Steinbeis, head of equity portfolio management at the Unterfoehring, Germany-based unit of Pioneer Investments, which oversees about $221 billion globally. “The cyclical tailwind is fading and the market is a bit under pressure. Expectations for the macroeconomic environment and earnings are still ambitious.”
The MSCI Asia Pacific Index fell 1.2 percent today, the first drop in five days. Standard & Poor’s 500 Index futures slid 1.4 percent. The euro fell against the dollar, retracing 50 percent of the rally from October 2000 to July 2008.
China Manufacturing
China’s Purchasing Managers’ Index slid to 53.9 from 55.7 in April, the Federation of Logistics and Purchasing said today. That was less than the median 54.5 estimate in a Bloomberg News survey of 18 economists. Readings above 50 indicate expansion.
A gauge of manufacturing in the euro region declined to 55.8 in May from 57.6 the previous month, Markit Economics said. That’s below an initial estimate of 55.9 released on May 21.
In the U.S., the Institute for Supply Management’s factory index fell to 59 last month from an almost six-year high of 60.4 in April, according to the median estimate in a Bloomberg survey of 74 economists. The report is due at 10 a.m. New York time.
Fitch Ratings lowered Spain’s credit rating to AA+ from AAA on May 28, capping off a month where the escalation of Europe’s debt crisis forced the European Union and the International Monetary Fund to offer as much as 750 billion euros ($920 billion) to countries in danger of financial instability. S&P in April cut Greece’s debt to junk and followed with reductions to Portugal and Spain.
Market Turmoil
Banque de France Governor Christian Noyer said credit- rating companies responded to market turmoil when making the downgrades, aggravating Europe’s debt crisis by failing to provide timely risk assessments. There had been “absolutely no change” in information available for months before the ratings were cut, showing the decisions could have been made earlier, Noyer said at a forum in Seoul today.
BP, the third-largest stock in the Stoxx 600, slumped 15 percent to 418.7 pence, the biggest intraday drop since 1992. The company said on May 29 a “top kill” attempt to plug the worst oil spill in U.S. history using heavy fluids and debris had failed. That rules out stopping the flow of crude from the well until relief drilling is completed in August.
Credit-default swaps on BP rose 36 basis points to a record 136, according to CMA DataVision. BP may break up or become a takeover target, London-based investment bank Arbuthnot Securities Ltd. said.
‘Can BP Survive?’
“There has been much speculation regarding both Tony Hayward’s future at the company and the possibility of the dividend being cut,” Arbuthnot analyst Dougie Youngson said in a note today. “The situation is beyond both of these points and the key question is now ‘can BP survive?’”
Saipem SpA slid 4.5 percent to 24.40 euros as Europe’s biggest provider of oilfield services by market value was cut to “neutral” from “add” at Evolution Securities Ltd.
Boliden, a Swedish copper and zinc miner, slid 3 percent to 91.70 kronor as base metals declined. BHP Billiton Ltd., the world’s biggest mining company, fell 3.4 percent to 1,849 pence. A measure of European basic-resource shares fell as much as 2.9 percent today.
Rio Tinto Group slumped 2.4 percent to 3,113 pence. The third-largest mine operator said the company is paying its “fair share” of Australian taxes after Prime Minister Kevin Rudd vowed to push ahead with plans to impose a 40 percent levy on profits.
Santander, BNP
Banco Santander SA, Spain’s biggest bank, and BNP Paribas SA, France’s largest, lost 3.8 percent to 8.01 euros and 3.4 percent to 44.75 euros, respectively, driving European banking shares lower.
Europe’s banks will have to write off more loans this year than in 2009 and their ability to sell bonds may be curtailed by governments seeking to finance fiscal deficits, the European Central Bank said.
With governments facing “heavy financing requirements over the coming years” there’s a “risk of bank bond issuance being crowded out,” the Frankfurt-based ECB said in its biannual Financial Stability Report yesterday. “The risk that this implies for bank funding costs also raises the possibility of a setback to the recovery in banking sector profitability.”
Prudential surged 3.9 percent to 562.5 pence. AIG rejected a request from the U.K.’s largest insurer to cut the price of its $35.5 billion offer for AIA Group Ltd., fueling speculation the takeover won’t go ahead.
‘Dead Deal’
Prudential was seeking to lower the price to $30.4 billion, the London-based company said today. New York-based AIG “will adhere to the original terms of its previously announced agreement with Prudential,” it said in a separate statement.
“It’s a dead deal,” said Paul Mumford, who helps oversee about $600 million including Prudential shares at Cavendish Asset Management Ltd. in London. “The Pru will have to pull back gracefully now. It was a very costly mistake.”
Ryanair Holdings Plc gained 2.6 percent to 3.47 euros as Europe’s largest discount carrier said it will pay its first dividend after reporting an annual profit.
Net income in the 12 months through March 31 was 305 million euros, compared with a net loss of 169 million euros a year earlier. The carrier said it plans to pay a special dividend of 500 million euros in October, its first payment to shareholders since the company sold stock in 1997.
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