July 02, 2007

European Stocks Fall; Air France, Royal & Sun Lead Decline

European stocks retreated for the first time in three days, paced by airlines and insurers after attempted terrorist attacks in the U.K.

Air France-KLM Group and British Airways Plc dragged the Dow Jones Europe Stoxx Travel & Leisure Index to the lowest in more than three months. Royal & Sun Alliance Insurance Group Plc led a drop by British insurers, which also fell on concern that claims tied to floods in the U.K. will rise.

``There is no positive news out there today,'' said Philipp Musil, who helps oversee $24 billion at Vienna-based Constantia Privatbank AG. ``The terror attacks in the U.K.'' are weighing on markets.

Europe's Stoxx 600 slid 0.4 percent to 392.23 in London.

Police in Scotland arrested two more suspects in connection with an attack on Glasgow International Airport, which U.K. authorities have linked to two attempted car bombings in London. Six men and one woman are now in custody. The terrorist threat adds to concerns weighing on markets, including speculation interest rates may rise and that defaults tied to subprime loans might increase.

The terrorism alert ``provides further impetus to those investors who are already thinking defensively,'' said Jeremy Batstone, a strategist at Charles Stanley & Co. in London. ``We have seen a pickup in demand for bonds and I think that will probably continue.''

Bonds Rise

European bonds advanced today, pushing 10-year yields to the lowest in more than three weeks, as investors sought the safety of government debt.

National benchmarks fell in 8 of 18 western European markets. France's CAC 40 retreated 0.5 percent. Germany's DAX decreased 0.6 percent. The U.K.'s FTSE 100 slid 0.3 percent.

The Stoxx 50 lost 0.4 percent, as did the Euro Stoxx 50, a measure for the euro region. Indexes pared some losses after a measure of U.S. manufacturing growth rose to the highest level in 14 months, beating analysts' estimates.

Royal Dutch Shell Plc and Repsol YPF SA led oil stocks higher as crude oil traded near a 10-month high. Groupe Danone SA gained after a report it might be in talks to sell its biscuit and cereal products division to Kraft Foods Inc. of the U.S.

Air France-KLM, the region's biggest carrier, dropped 0.7 percent to 34.34 euros. British Airways, Europe's third-largest airline, slid 1.4 percent to 412.75 pence.

The industry subindex fell 0.9 percent to the lowest since March 19.

Oil prices also weighed on airlines. The contract for August delivery rose $1.11, or 1.6 percent, to $70.68 a barrel on June 29, the highest close since Aug. 25. The contract slipped 1.3 percent today to $69.77.

The full of this article's can be read on the source at: Bloomberg.com By Andreas Hippin

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