European stocks Down July 18 2011, Effect European Bank stress tests

European stocks Down July 18 2011, Effect European Bank stress tests : European stocks fell for a third day, extending the biggest weekly selloff for the Stoxx Europe 600 Index in four months, as stress tests showed lenders may have to raise additional capital. U.S. index futures and Asian shares also declined.

A gauge of European banks extended a two-year low as analysts warned that as many as 20 lenders may need to bolster capital. Kuehne & Nagel International AG, the 120-year-old shipping company, fell 4.4 percent after earnings missed analysts’ estimates. Royal Philips Electronics NV gained 2.2 percent as profit topped projections.

The Stoxx 600 dropped 0.3 percent to 266.16 at 8:23 a.m. in London. The gauge dropped 2.5 percent last week amid mounting concern the sovereign-debt crisis will spread to Italy and Spain. The selloff left the index trading at about 12.5 times reported earnings, near the cheapest since December 2008, data compiled by Bloomberg show.

“Friday’s stress tests have merely added to the uncertainty surrounding the health of the European financial system,” said Jonathan Sudaria, a trader at London Capital Group.

Standard & Poor’s 500 Index futures slid 0.5 percent today after the benchmark U.S. gauge tumbled 2.1 percent last week. MSCI Asia Pacific Index fell 0.3 percent, led by selloff in exporters such as Samsung Electronics Co.

German, Italian Stocks

Deutsche Bank AG (DBK), Germany’s biggest lender, slid 2.6 percent to 36.20 euros and Italy’s UniCredit SpA (UCG) lost 1.8 percent to 1.19 euros.

The European Banking Authority said 8 out of the 90 banks that failed the stress tests had a combined capital shortfall of 2.5 billion euros ($3.5 billion). The results were released after the close of trading on July 15.

Regulators didn’t include a Greek default in the tests even though credit default swaps indicate investors see an almost 90 percent chance of one. The EBA included a 25 percent writedown on 10-year Greek government bonds held in banks’ trading books even as the securities trade at about 51 cents on the euro.

JPMorgan Cazenove analysts led by Kia Abouhossein wrote in a report after the results were published that as many as 20 banks may need to boost capital.

“We remain worried about the secondary effect of the sovereign crisis into funding,” the JPMorgan analysts said. “Funding is the key concern, and without stress liquidity assumptions, the picture remains incomplete -- especially in current market conditions.”

Additional Capital

Christopher Wheeler, a banking analyst at Mediobanca SpA in London said UniCredit, Deutsche Bank, BNP Paribas (BNP) SA, Credit Agricole SA, Societe Generale (GLE) SA, Banco Santander SA and Credit Suisse Group AG (CSGN) are among banks that may have to raise a combined total of about 62 billion euros in additional capital. All the banks passed the EBA’s tests.

Kuehne & Nagel dropped 4.4 percent to 112.8 Swiss francs. The company reported second-quarter net income of 158 million francs ($194 million), trailing analyst estimates of 163 million francs.

Holcim Ltd. (HOLN) slid 1.5 percent to 55.56 francs after Chief Executive Officer Markus Akermann warned profitability may suffer “some pressure” as the cost of raw materials rises in local currencies. Akermann was speaking in an interview with Finanz & Wirtschaft.
Philips Gains

Philips advanced 2.2 percent to 17.75 euros after the world’s biggest maker of patient-monitoring systems reported second-quarter earnings before interest taxes and amortization of 370 million euros. Analysts in a survey had predicted 304 million euros. The company also posted a net loss of 1.34 billion euros after writing down the value of assets and announced a 2 billion-euro share buyback.

Thomas Cook Group Plc (TCG) rallied 3.5 percent to 72.9 pence, climbing for the first time in seven days, after the travel company announced a one-year extension of its bank facilities to May 2014. The facilities comprise a 200 million-pound ($323 million) term loan and an 850 million-pound revolving credit facility. (source blomberg )