Shire shares tumble as rival gets U.S. generic drug approval
By Sara Sjolin, MarketWatch
LONDON (MarketWatch) — European stock markets tanked and bond yields surged Monday as investor expectations diminished ahead of a closely monitored European Union summit later this week amid fears that the region’s leaders won’t do enough to curb the sovereign-debt crisis.
The Stoxx Europe 600 index XX:SXXP -1.70% fell 1.7% to 242.39. Europe’s benchmark advanced about 1% last week.
U.S. stocks registered steep early losses. Read more heavy selling hitting Wall Street.
“People are positioning themselves ahead of the summit at the end of the week,” said Neil Wilkinson, senior fund manager at Royal London Asset Management.
“I don’t think we have made any progress in the last couple of weeks and the fear of nothing happening at the summit is outweighing the upside there is of [EU leaders] reaching a conclusion,” he added.
In corporate news, shares of Nokia Corp. FI:NOK1V -10.77% NOK -8.87% ranked among the biggest decliners, plunging 10.3% to €1.73. Nomura Securities cut its target price to €2 from €3.20 and lowered 2012-2014 estimates for earnings per share.
Drug makers also weighed on indexes in Europe, with Novartis AG CH:NOVN -1.24% down 1.1%, Roche Holding AG CH:ROG -1.18% off 1% and Sanofi SA FR:SAN -1.67% 1.7% lower.
British pharmaceutical Shire PLC UK:SHP -10.94% tumbled 11.2% after the U.S. Food and Drug Administration approved rival Actavis Group’s generic version of hyperactivity drug Adderall XR. Shire sinks after rival generic drug gets OK
London’s FTSE 100 index UK:UKX -1.31% traded 1.4% lower at 5,435.71. Read more on a decidedly bearish FTSE 100 session.
For the broader European stock markets, investors pulled money out of riskier assets amid questions about whether the region’s leaders will agree on credible solutions to tame the euro-zone debt crisis when they meet in Brussels at the end of the week.
On Sunday, the Bank for International Settlements backed moves for a pan-European banking system to help soothe the region’s debt crisis. BIS backs pan-European banking system
Justin Urquhart Stewart, co-founder of Seven Investment Management, said that market participants in general lacked confidence in politicians and that recent measures to help ailing banks were merely dealing with symptoms of the crisis rather than the cause.
“If [German Chancellor Angela] Merkel and [French President François] Hollande can come up with the correct blend of keeping discipline in countries to obey austerity measures and a blend of growth initiatives, that might just be the key to the problem,” he said.
However, analysts increasingly expected the summit to reveal no firm measures to curb the crisis.
“We believe this week’s summit will yield more strong rhetoric in support of a road map toward tighter fiscal integration, rather than the end point itself,” analysts at Barclays said in a note. “Moreover, we also expect the significant preconditions needed along the way to be stressed. This may disappoint markets to some extent.”
Banks drop
Banks moved sharply lower to kick off the European trading week.
In Spain, shares of Banco Popular Español SA ES:POP -4.46% shed 5.5%, BBVA SA ES:BBVA -5.17% BBVA -6.63% lost 4.6% and, Banco Santander SA ES:SAN -4.33% SAN -5.37% dropped 4.2%.
Media reports said Moody’s Investors Service would announce a round of downgrades in the Spanish banking sector later in the day. A representative from Moody’s declined to comment. Moody's planning to cut Spain-bank ratings
Meanwhile, the country’s government made official its request for money to underpin the struggling Spanish banking sector, as Finance Minister Luis de Guindos sent a letter to Eurogroup chief Jean-Claude Juncker. The aid requested is enough to cover the capital needs of financial institutions plus an extra safety margin for a maximum amount of 100 billion euros ($125 billion). Spain sends official aid request to EU
The IBEX 35 index XX:IBEX -3.31% slumped 3.56 to 6,630.50, as pressure also intensified on the country’s government bonds.
Yields on the 10-year benchmark bond ES:10YR_ESP +4.07% jumped 28 basis points to 6.57%. Last week, the yield surged above 7%, which economists consider an unsustainable level of borrowing costs.
Among German financials, Deutsche Bank AG DE:DBK -4.68% shed 4.4%, while Commerzbank AG DE:CBK -3.13% moved 2.2% lower.
Frankfurt’s DAX 30 index DX:DAX -2.29% lost 2.2% to 6,124.31, further weighed by industrial conglomerate Siemens AG DE:SIE -2.69% XE:SIEB -0.68% — off 2.6%.
Elsewhere, shares of ABB Ltd. SE:ABB -4.27% CH:ABBN -2.86% fell 3.1%. J.P. Morgan Cazenove downgraded the power-technology firm to underweight from neutral.
In Greece, investors also witnessed steep declines for stocks. The Athens General Index GR:GD -6.84% tanked 6.8% to 566.79, with National Bank of Greece SA GR:ETE -13.61% 13.6% lower.
Reports said over the weekend that Greece’s new Prime Minister Antonis Samaras and Finance Minister Vassilis Rapanos won’t be able to attend the EU summit this week due to health issues. Greek PM won't attend EU meeting: report
Also Monday, Fitch Ratings cut its credit rating on Cyprus to BB-plus from BBB-minus, citing expectations the country’s banks will need substantial capital injections largely because of the banking sector’s exposure to Greek debt. Fitch downgrades Cyprus to BB+, negative outlook
