MW: European Stocks, U.S. Futures Decline on Italy
European stocks retreated, extending last week’s selloff, amid concern the region’s sovereign-debt crisis is spreading from Greece to Italy. Asian shares and U.S. index futures fell.
Carrefour SA (CA) dropped 3.4 percent as euro-region retail sales fell and Citigroup Inc. downgraded the shares. Banks limited losses, led by a rebound in UniCredit SpA (UCG) and Intesa Sanpaolo SpA (ISP) amid conflicting reports that Italian Prime Minister Silvio Berlusconi may resign.
The Stoxx Europe 600 Index slipped 0.5 percent to 238.54 at 1:14 a.m. in London, paring an earlier loss of as much as 1.8 percent. The MSCI Asia Pacific Index fell 0.5 percent and Standard & Poor’s 500 Index futures declined 0.6 percent.
“The market is trading on headlines,” said Jeremy Batstone-Carr, head of research at Charles Stanley & Co. in London. “In an environment such as this with a kaleidoscope of news coming out of Europe, we are going to see extraordinary volatility. It is a real swamp of a market for investors, there is no clear direction.”
Morgan Stanley advised investors to sell European stocks as politicians respond “inadequately” to the fiscal crisis and economic growth weakens. The bank downgraded its stance to “underweight” from “neutral.” The region’s finance chiefs are meeting in Brussels today to work on details of a plan to expand the region’s bailout fund.
Italian Budget Vote
In Italy, Berlusconi’s majority is unraveling before a key parliamentary vote tomorrow on the 2010 budget report after contagion from Europe’s sovereign debt crisis pushed the country’s borrowing costs to euro-era records.
Two Berlusconi allies defected to the opposition last week, and a third quit last night. Six others called for Berlusconi to resign and seek a more broadly-backed government in a letter to newspaper Corriere della Sera. Over a dozen more are ready to ditch the premier’s coalition, Repubblica reported yesterday, without citing anyone. Berlusconi said yesterday he was confident he still had a majority.
Berlusconi is likely to decide on his political future “within hours” with his formal resignation coming next week after he secures parliamentary approval of austerity and economic-growth measures, his former spokesman Giuliano Ferrara said by phone. Berlusconi said he’s not stepping down, according to news agency Ansa.
Greek Vote
Europe’s Stoxx 600 dropped 3.7 percent last week after a failed attempt by Greek Prime Minister George Papandreou to hold a referendum on the latest bailout package roiled financial markets and spurred concern Greece may default.
Papandreou yesterday agreed to step down to allow the creation of a new national unity government intended to secure international financing and avert a collapse of the country’s economy. He will meet with Antonis Samaras, leader of the main opposition party today.
“We are all looking for the next policy maker’s speech,” Robert Talbut, chief investment officer at Royal London Asset Management, said in an interview with Bloomberg Television. “There is an enormous amount of uncertainty around how this crisis is going to play out.”
National benchmark indexes fell in half of the 18 western European markets today. The U.K.’s FTSE 100 slid 0.5 percent while France’s CAC 40 rose 0.1 percent. Germany’s DAX Index gained 0.2 percent.
Carrefour Slides
Carrefour dropped 3.4 percent to 19 euros as Citigroup lowered its recommendation for the world’s second-biggest retailer to “sell” from “neutral.” Metro AG (MEO), Germany’s largest retailer, slid 2.8 percent to 34.65 euros.
European retail sales fell more than forecast in September as the debt crisis prompted households to cut spending. Sales in the 17-nation euro region decreased 0.7 percent from August, the European Union’s statistics office said today. The median economist forecast was for a drop of 0.1 percent.
Sandvik AB lost 2.7 percent to 87.05 kronor after the world’s largest maker of metal-cutting tools offered 6.19 billion kronor ($933 million) to buy the remaining shares of its subsidiary Seco Tools AB (SECOB) to expand its new machine solutions business area. Seco rose 26 percent to 102.80 kronor.
Rentokil Initial Plc (RTO) fell 3.6 percent to 66.45 pence. The world’s biggest pest-control company cut its savings and earnings targets for the year as it pumps money into restoring profit at its City Link parcel-delivery service.
Banks rebounded, led by Italian lenders. UniCredit and Intesa rallied 3.3 percent to 80.3 euro cents and 4.4 percent to 1.18 euros, respectively. Italy’s benchmark FTSE MIB Index gained 1.8 percent.
Ryanair Holdings Plc (RYA) added 4.5 percent to 3.50 euros after Europe’s largest discount airline raised its full-year profit forecast by 10 percent to 440 million euros ($606 million) as higher ticket prices offset a slowdown in growth.
Bayer AG (BAYN) advanced 3.2 percent to 46.35 euros after its blood thinner Xarelto won approval in the U.S. to prevent strokes in people with atrial fibrillation, an irregular heartbeat that affects more than 2 million Americans.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
