European stocks retreat on Moody's ratings review

European stocks retreated as Moody’s Investors Service said it will review the credit ratings of all countries in the region following last week’s debt summit. US index futures fell, while Asian shares rose.

Eurasian Natural Resources Corp dropped 5.2 per cent even after denying a report it is being formally investigated by UK regulators over corruption allegations. Xstrata Plc led copper producers lower as the base metal retreated. London Stock Exchange Group Plc lost 4.5 per cent as Standard & Poor’s placed its credit rating on review for a downgrade.

The benchmark Stoxx Europe 600 Index retreated 0.7 per cent to 238.8 at 10.52 am in London, having earlier fallen as much as 1.3 per cent. The gauge slipped 0.1 per cent last week as the European Central Bank damped speculation it would boost bond purchases, overshadowing an agreement by European Union leaders to step up measures to fight the debt crisis.

“A lot and nothing has changed following the most recent EU summit,” Dan Morris, a strategist at JPMorgan Chase & Co in London, wrote in a report on Monday. “It will be a combination of ECB support for banks and sovereigns, plus individual country progress on reform and austerity packages, which will determine how markets move over the next several months.”

Futures on the Standard & Poor’s 500 Index expiring in March slid 0.9 per cent on Monday, while the MSCI Asia Pacific Index gained 0.5 per cent.

Moody’s review
Moody’s said it will review the ratings of all EU countries in the first quarter, saying the summit failed to deliver “decisive policy measures” to end the debt crisis. The review will be completed in the first quarter of next year.

Germany’s top central banker yesterday cooled speculation that the ECB will extend its role after European leaders agreed a new fiscal accord last week.

Bundesbank President Jens Weidmann told the Frankfurter Allgemeine Sonntagszeitung that while the new accord represents “progress,” the onus is on governments rather than the ECB to resolve the crisis. German Finance Minister Wolfgang Schaeuble said euro-area policy makers will now focus on implementing last week’s pact.

Stocks pared losses after Italy sold ¤7 billion ($9.3 billion) of one-year bills, the maximum for the auction, with a reduced yield. Borrowing costs fell to 5.952 per cent on Monday from 6.087 per cent at the last sale on November 10 after Prime Minister Mario Monti’s government approved a ¤30 billion emergency economic plan.

France is also scheduled to auction ¤6.5 billion of debt of three different maturities on Monday.

ENRC sank 5.2 per cent to 649.5 pence even after denying a report in the Sunday Times that Britain’s Serious Fraud Office started an inquiry into allegations of corruption at a Kazakh iron ore unit.

“There is no formal SFO investigation into the company,” said an ENRC spokesperson. “There was nothing new in the Sunday Times story. The internal audit committee investigations and liaison with appropriate regulators, including the SFO, is entirely normal practice for a major company that is serious about investigating all allegations properly and striving to meet corporate governance best practice.”

Xstrata dropped 2.9 percent to 981.9 pence, Kazakhmys Plc slid 2.2 percent to 922.5 pence and BHP Billiton Ltd. (BHP) slipped 1.8 percent to 1,926 pence. Copper fell as much as 2.5 percent in London trading as China’s exports cooled.

China Exports
China’s export growth slowed in November to the weakest pace since 2009, making the government more likely to further ease policies to sustain the expansion of the world’s second- largest economy. Overseas shipments rose 13.8 percent from a year earlier, the customs bureau said on Dec. 10. Excluding distortions in January and February each year, that was the least since export growth resumed in December 2009.

LSE declined 4.5 percent to 783 pence. The equity-market operator that also owns a clearinghouse in Italy, may have its credit rating cut by S&P because Italian banks’ finances are deteriorating.

Separately, the exchange agreed to buy the 50 percent of FTSE International Ltd. that it doesn’t already own from Pearson Plc (PSON) for 450 million pounds ($702 million). Pearson shares gained 0.4 percent to 1,148 pence.

Swedbank AB (SWEDA) declined 3 percent to 86.4 kronor as Latvians withdrew at least $19 million from the Swedish bank’s automatic teller machines amid concern the lender may close its Estonian business and speculation the ATMs were malfunctioning.

Maris Mancinskis, the head of Swedbank’s Latvian unit, said the speculation was “not only false, but also completely absurd.”

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net