Europe: Stocks decline as investors watch Greek crisis, Fed

[FRANKFURT] European stocks declined, amid continued debate over Greece's fate, and speculation the Federal Reserve will signal a slow pace of monetary tightening.

The Stoxx Europe 600 Index slid 0.5 per cent to 383.74 at the close of trading. Shares earlier fell as much as 0.8 per cent after Finance Minister Wolfgang Schaeuble was said to have told lawmakers in Berlin that the German government is making contingency plans for failure to reach an aid deal with Greece by June 30.

Greek stocks erased earlier gains after Prime Minister Alexis Tsipras said he's ready to take responsibility for rejecting the terms of a deal on aid if creditors' demands are unacceptable. The ASE Index fell 3.2 per cent to its lowest close since September 2012.

"The situation in Greece is foggy and things can change any second," said Nicola Marinelli, a fund manager who helps oversee 114 million euros of assets at Pentalpha Capital Ltd in London. "The US has picked up some momentum compared with the start of the year. The Fed will likely keep its stance and stay the course unless we get a big disappointment in terms of data on the labor market or growth."

The Fed concludes its two-day policy meeting Wednesday, amid speculation mixed US economic data and a deadlock over Greece may complicate the central bank's drive to raise interest rates.

Traders put the odds of a September rate hike at 47 per cent in the US Tuesday, down from 53 per cent as recently as last Friday, data compiled by Bloomberg show. Fed Chair Janet Yellen may provide further clues at a press conference Wednesday after European markets close.

Even as Greek Prime Minister Alexis Tsipras intensified his criticism of the country's creditors, German Chancellor Angela Merkel has said she will continue to do everything possible to keep Greece in the euro.

Greece has snubbed European pleas to submit a new proposal to avert insolvency, saying it was up to creditors to make the next move. The lenders say it's the other way around. The focus now shifts to a meeting of finance ministers on Thursday and a June 25-26 summit of European Union leaders.

A measure of auto-related shares was among the worst performers on the Stoxx 600 as Credit Suisse Group AG cut its 2015-2017 earnings estimates for suppliers because of weakness in the Chinese market. Faurecia SA led declines, falling 6.3 per cent as the bank said the French company was most at risk due to its customer and product mix.

A gauge of energy stocks posted the best performance of the 19 industry groups on the Stoxx 600. Tullow Oil Plc rose 2.5 per cent and Lundin Petroleum AB added 2.7 per cent.

Berkeley Group Holdings Plc surged 10 per cent after London's largest homebuilder posted a 45 per cent jump in full- year earnings. Remy Cointreau SA climbed 3 per cent after the French distiller reported annual operating profit that beat analyst estimates.

BLOOMBERG