European stocks dropped as US payrolls data missed economists' forecasts and Hungary said its economy is in a ``very grave'' situation, reigniting concern the region's debt crisis is spreading.
Societe Generale and Raiffeisen International Bank tumbled more than 7 per cent, leading a gauge of banks to the biggest decline in three weeks. BHP Billiton paced a retreated in mining shares as base metals fell. Opap SA plummeted 9.1 per cent as Alpha Finance SA downgraded Europe's largest publicly traded gambling company.
The Stoxx Europe 600 Index sank 1.8 per cent to 244.53, trimming this week's advance to 0.2 per cent. The gauge has retreated 10 per cent from this year's high on April 15 amid concern a European sovereign-debt crisis that started in Greece may hamper growth. The VStoxx Index, which gauges the cost of protecting against declines in the Euro Stoxx 50 Index, soared 13 per cent to 37.69, the biggest gain in more than two weeks.
``The market is still very nervous about sovereign risk and Hungary today,'' said Lawrence Peterman, London-based investment director at Eden Financial Ltd., a brokerage firm. ``Markets move on data and the initial reaction is clearly down on the back of lower-than-expected jobs numbers.''
National benchmark indexes declined in all 18 western European markets, except Iceland. The U.K.'s FTSE 100 sank 1.6, Germany's DAX fell 1.9 per cent and France's CAC 40 tumbled 2.9 per cent. Austria's ATX plunged 4.1 per cent to the lowest close since July last year.
`Manipulated' figures
European stocks erased earlier gains after a spokesman for Hungarian Prime Minister Viktor Orban said the previous government ``manipulated'' figures and ``lied'' about the state of the economy. Markets extended losses as a government report showed US employers hired fewer workers than forecast in May.
``It's no exaggeration'' to talk about a default, Hungarian spokesman Peter Szijjarto said today at a news conference in Budapest. A fact-finding committee, headed by State Secretary Mihaly Varga, will likely present preliminary figures on the state of the economy over the weekend, he said.
``You simply cannot talk like this in these markets,'' said Timothy Ash, head of emerging-market research at Royal Bank of Scotland Group Plc, wrote in an e-mailed comment. ``Not sure what the Hungarians are doing at the moment, but the new government needs to think a bit more clearly about communication with the market.''
SocGen slides
Societe Generale, France's second-largest bank by market value, slumped 7.6 per cent to 31.59 euros. Austria's Raiffeisen sank 8.3 per cent to 31.15 euros. UniCredit SpA, Italy's biggest bank, declined 5.7 per cent to 1.56 euros and National Bank of Greece SA dropped 6.7 per cent to 9.74 euros.
CNBC reported that Societe Generale is the subject of unconfirmed rumors of a derivatives loss, without saying where it got the information. The bank declined to comment on the report. Societe Generale is telling analysts that it didn't suffer losses on derivatives, said two people familiar with the matter, who declined to be identified.
BHP Billiton, the world's largest mining company, slid 3.7 per cent to 1,771 pence. Kazakhmys declined 5 per cent to 1,119 pence. Xstrata Plc, the world's fourth-largest copper producer, dropped 3.5 per cent to 951.2 pence.
Copper fell for a fifth day on the London Metal Exchange, extending losses after the US Labor Department figures. Payrolls rose by 431,000 last month, including a 411,000 jump in government hiring of temporary workers for the 2010 census, missing the 536,000 median estimate in a Bloomberg survey of economists. Private payrolls rose a less-than-forecast 41,000.
Opap drops
Opap plunged 9.1 per cent to 11.50 euros, the biggest drop since at least 2001. The gambling company was downgraded to ``neutral'' from ``outperform'' by Alpha Finance on the outlook for earnings.
Rockhopper Exploration jumped 33 per cent to 319 pence after the oil explorer said its Sea Lion find near the Falkland Islands contained medium gravity crude.
Rival Falkland Oil & Gas Ltd. climbed 10 per cent to 206 pence, while Borders & Southern Petroleum Plc surged 9.6 per cent to 74 pence.
Valeo SA rallied 3.5 per cent to 24.34 euros after the company said it's working with financial advisers to evaluate options to yield the ``highest possible value'' as part of an industrial strategy that was approved by the board.
The New York Times' Dealbook reported that options include a major unit sale to help reduce debt, a leveraged buyout to take the company private, and a merger with a North American rival in a stock-for-stock deal. The company has hired Bank of America Merrill Lynch as an adviser, the New York Times said, cited two people with direct knowledge of the matter.
Bloomberg News
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