European Stocks Fall in Week as U.S. Stalls Bailout; Banks Drop

Sept. 27 (Bloomberg) -- European stocks retreated for a second week as negotiations on the U.S. government's $700 billion bank rescue plan stalled, adding to the turmoil that has roiled financial markets this month.

Bradford and Bingley Plc and Natixis SA led a gauge of bank shares to its biggest drop in three months as Republicans said they wouldn't support the proposed bailout plan and as Washington Mutual Inc. was seized in the largest U.S. bank failure. Fortis plunged 35 percent on speculation the Belgian bank will struggle to raise 8.3 billion euros ($12.2 billion) to bolster capital.

``This rescue package is extremely important,'' said Stephen Thornber, who oversees about $1 billion as a London-based money manager at Threadneedle Asset Management. ``The politicians are picking at the details, but both sides recognize that something has to be done. Markets will be volatile while we wait for something to be put in place.''

The Dow Jones Stoxx 600 Index lost 4.4 percent to 265.92 this week, as 17 of 19 industry groups declined. The measure has fallen 27 percent this year as banks racked up more than $556 billion in credit losses and writedowns. WaMu is the latest casualty of the crisis that drove Lehman Brothers Holdings Inc. out of business and led to the emergency takeovers of Merrill Lynch & Co. and Bear Stearns Cos.