European shares retreat as Greek, telecoms stocks drop

European stock markets gave back some of the gains made earlier in the week as doubts returned on Wednesday over Greece’s debt crisis and French telecoms shares slumped after Bouygues rejected a bid.

The pan-European FTSEurofirst 300 index fell 0.4 per cent, while the euro zone’s blue-chip Euro STOXX 50 index dropped 0.8 per cent.

Athens’ benchmark ATG equity index, which had risen 15 per cent in the last two days, fell 3.6 per cent and the Greek bank index dropped 7.2 per cent after a Greek official said Prime Minister Alexis Tsipras told associates that measures proposed by his government had not been accepted by creditors.

Greece’s Syriza government had earlier expressed confidence that parliament would approve a debt deal with lenders, despite an angry reaction from some of its own lawmakers who accused it of caving in to pressure for more austerity.

“It is worth noting that while Greece does appear to have made strides towards a deal with its latest proposal, we shouldn’t forget that these things rarely go smoothly and even at this late stage, negotiations could hit a few speed bumps,’’ OANDA senior market analyst Craig Erlam said.

Telecom stocks slump

French telecom stocks were among the worst performers, with Bouygues falling 8.6 per cent after the conglomerate’s rejection of an offer by Altice for its telecoms arm.

Altice slid 7.8 per cent, while shares in Numericable-SFR — owned by Altice — also slumped 9.4 per cent. Shares in French rivals Orange and Iliad also weakened by between about 3 per cent and 6 per cent.

Bouygues’ decision to turn down Altice’s offer followed opposition from French President Francois Hollande’s Socialist government which had expressed concern over the deal, saying it could be bad for jobs, consumers and investment.

“Once you start getting politicians involved in the mix, these deals always become very difficult,’’ Clairinvest fund manager Ion-Marc Valahu said.

The Athens’ ATG is down 7 per cent since the start of 2015 but the FTSEurofirst remains up by about 16 per cent, since economic stimulus measures from the European Central Bank (ECB) have cushioned the impact of Greece on European markets.

Some brokers and investors remain confident Greece will remain in the euro zone, despite persistent concerns over the country's debts.

The euro, which has proved extremely resilient in two months of tension around Greece, fell around 0.2 per cent as the headlines on the talks emerged, but was still trading 0.2 per cent higher on the day at $1.1186.

Credit Suisse strategists increased the size of their “overweight’’ position in European equities and were confident a deal could be reached on Greece.

“We continue to see a very high probability of a temporary deal. Deposit outflows have now reached levels where weaker Greek banks are running out of collateral, and hence Syriza will likely have to compromise,’’ they wrote in a research note.

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