EU stocks fall on disagreement over Greece

BRUSSELS

European stocks fell for a fifth day after euro-area finance ministers and the International Monetary Fund failed to agree on how Greece will repay its debt. U.S. index futures and Asian shares also dropped.

EON AG slumped 9.8 percent after Germany's biggest utility lowered its earnings forecast for 2013. Vodafone Group Plc (VOD) slid 3.5 percent after the world's second-largest mobile-phone company took a 5.9 billion-pound ($9.4 billion) writedown for its operations in Spain and Italy. Pirelli & C SpA declined 3.5 percent after the tiremaker cut its 2012 revenue target and raised its debt forecast.

EON AG slumped 6.9 percent after Germany's biggest utility lowered its earnings forecast for 2013. Photographer: Timothy Fadek/Bloomberg

The Stoxx Europe 600 Index dropped 0.5 percent to 268.12 at 8:41 a.m. in London, its longest losing streak since May. The equity benchmark has retreated 2.4 percent since President Barack Obama won re-election as concern grew that impending U.S. tax increases and spending cuts, known as the fiscal cliff, will harm the world's biggest economy.

"The existential threat to the euro zone persists in the short term and is a reason to be cautious," said Abi Oladimeji, head of investment strategy at Thomas Miller Investment Ltd. in London, who advised reducing holdings in equities. "Both the euro-zone crisis and the fiscal cliff are downside risks to the financial and economic outlook," he said in a phone interview.

The Euro Stoxx 50 Index, a benchmark for the euro region, slipped 0.8 percent to 2,454.16 today. Standard & Poor's 500 Index futures expiring in December slid 0.7 percent, while the MSCI Asia Pacific Index lost 0.6 percent.

Euro-area finance ministers gave Greece an extra two years to cut its budget deficit to 2 percent of gross domestic product, pledging to plug the resulting financing gap to prevent the country from leaving the single currency.

Finance ministers put off until Nov. 20 a decision on how to cover additional Greek needs of as much as 32.6 billion euros ($41 billion) and left unclear whether the International Monetary Fund will continue to contribute. IMF Managing Director Christine Lagarde disagreed with a decision by the representatives of the 17-nation currency zone to postpone the goal of getting Greece's debt down to 120 percent of GDP by two years, until 2022.

"European finance ministers now have to grapple with two particularly thorny questions: how to finance Greece for the next four years and how to ensure that Greece's burgeoning debt burden is sustainable?" James Nixon, an economist at Societe Generale SA in London, wrote in a report today. "Given the political reluctance to grant Greece any more leeway, a resolution to these questions still looks challenging."

A report from the ZEW Center for European Economic Research at 11 a.m. in Mannheim, Germany, will show that a measure of investor confidence in Europe's biggest economy climbed this month, according to a survey of economists.

EON slumped 9.8 percent to 14.93 euros after saying yesterday its forecast of 3.2 billion euros to 3.7 billion euros of underlying net income next year "no longer seems achievable" because gas-fired power plants aren't making money. The company said it will consider cutting dividend payments because of the "substantial economic uncertainties and structural changes in the energy industry."

The utility today reported profit that more than doubled in the first nine months from a year earlier.

Vodafone slid 3.5 percent to 160.8 pence as the announcement of the impairment outweighed its decision to start a 1.5 billion-pound buyback plan. Verizon Wireless will pay an $8.5 billion dividend to its coowners, Vodafone and Verizon Communications Inc., by the end of 2012, enabling Vodafone to finance the share buyback.

Pirelli dropped 3.5 percent to 8.37 euros. Europe's thirdlargest tiremaker yesterday lowered its forecast for 2012 revenue by 250 million euros to 6.15 billion euros because of Europe's economic slowdown. Third-quarter profit missed analysts' estimates. The company forecast debt will rise to more than 1.2 billion euros from a previous target of less than 1.1 billion euros, according to a statement after markets closed. Third- quarter net income fell 7.3 percent to 87 million euros, missing the average estimate of 102.2 million euros in a Bloomberg survey (PC) of six analysts.

K+S AG (SDF) sank 5.1 percent to 34.08 euros after saying earnings before interest and taxes excluding some hedging transactions, referred to as Ebit I, will be about 820 million euros this year, rather than at the upper end of a range extending to 900 million euros. Revenue will be just over 3.9 billion euros, compared with the top-end figure of 4.2 billion euros, the company added.

FLSmidth & Co. A/S tumbled 5.4 percent to 324.70 kroner. The Danish maker of mining equipment reported thirdquarter net income that missed analysts' estimates. It also forecast an annual profit margin before interest and taxes of 8 percent, compared with previous guidance of as much as 9 percent.

Sonova Holding AG (SOON) surged 8.3 percent to 100.70 Swiss francs. The Swiss provider of hearing products reported first- half profit that beat analysts' estimates as its cochlear- implant segment became profitable and the hearing-aid business expanded in the UK and Spain.

ITV Plc advanced 5.7 percent to 91.7 pence. The U.K.'s biggest terrestrial commercial broadcaster said group external revenue rose 4 percent in the first nine months of this year. The company also raised a target for cost savings this year.