European stocks declined, extending three weeks of losses, as a bailout of Ireland failed to reassure investors that the region’s sovereign-debt crisis will be contained. Spanish and Italian equities led declines in Europe as the cost of insuring the nations’ debt climbed to records. Vestas Wind Systems A/S lost 4.5 percent as Exane BNP Paribas advised selling shares of the world’s largest maker of wind turbines. Allied Irish Banks Plc and Bank of Ireland Plc jumped more than 7 percent after euro-region governments agreed to hand the nation an 85 billion-euro ($113 billion) aid package. The Stoxx Europe 600 Index retreated 0.9 percent to 264.22 at 2:16 p.m. in London, having earlier risen 0.8 percent. The measure has declined for three straight weeks as concern mounted that peripheral euro-area countries may not be able to repay their debt and North Korea fired shells on South Korea for the first time since the 1950-53 war. “Whether you think the sovereign problems stop at Greece, Ireland and perhaps Portugal depends on whether you think this is a problem with the overall Western financial system or whether you think it’s only a problem with individual over- leveraged entities,” Jim Reid, the head of global strategy at Deutsche Bank AG, wrote in an e-mail today. “Spain may not have a problem in isolation per se but if we are in a deleveraging trend it may simply be one of the next deleveraging victims.” Indebted Economies Gains on the Stoxx 600 have been limited to 4.1 percent this year, restrained by losses in the euro region’s most indebted economies, the cost of providing a bailout to Greece and expectations for more charges to support Ireland. National benchmark indexes declined in all 18 western European markets today, except Ireland. Spain’s IBEX 35 slid 1.7 percent, Italy’s FTSE MIB lost 1.5 percent and Portugal’s PSI-20 retreated 1.2 percent. The cost of insuring the debt of Spain and Portugal soared to record levels, according to CMA prices for credit-default swaps. Contracts on Spain climbed 14 basis points to 336 while Portugal rose 23 basis points to 524. “There remains a large degree of uncertainty throughout Europe with investors refusing to buy into Spanish or Portuguese stocks fearing that these could be the next two states requiring a similar bailout solution to that of Ireland,” said Joshua Raymond, a markets strategist at City Index Ltd. in London. Franco-German Compromise European finance chiefs holding crisis talks on Ireland yesterday also by endorsed a Franco-German compromise on post- 2013 rescues that means investors won’t automatically split the cost of future bailouts with taxpayers. The loss-sharing proposal by German Chancellor Angela Merkel had caused consternation among bond traders. In the U.K., house prices fell for a fifth month in November as demand for property dropped the most in almost two years, Hometrack Ltd. said. The report adds to evidence of a weakening property market after Rightmove Plc said on Nov. 15 that home sellers cut asking prices by the most since 2007 this month and U.K. banks approved the smallest number of mortgages since 2009 in October. Even so, stocks in Europe will rally 9.9 percent by the end of 2011 and U.K. shares will climb 13 percent as earnings gain and investors favor equities over bonds, Graham Secker, Morgan Stanley’s head of pan-European equity strategy, wrote in a report today. Vestas slid 4.5 percent to 157.5 kroner as Exane downgraded the shares to “underperform” from “neutral.” Irish Banks Bank of Ireland jumped 19 percent to 31.4 euro cents, the biggest rally in the Stoxx 600. Allied Irish soared 7.9 percent to 36.9 cents. Ireland’s banks will get as much as 35 billion euros of aid while senior bondholders will escape the cost of the bailout led by the European Union and International Monetary Fund, the government said. Gartmore Group Ltd., the U.K. fund manager that slumped earlier this month after losing star money manager Roger Guy, rose 2 percent to 105.1 pence as the Financial Times reported that Henderson Group Plc is considering buying the company. Henderson has asked advisers to examine the possibility of buying a portion or all its rival, the Financial Times reported on its website, citing unidentified people familiar with the situation. Henderson, on behalf of clients, controls about 11 percent of Gartmore, the newspaper said. Aryzta AG surged 5.1 percent to 42.35 Swiss francs after the Swiss supplier of bakery products to restaurants said fiscal first-quarter sales gained 33 percent. To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net.

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