Swiss stocks declined for the third time in four days as the spread between yields on Italian and German bonds widened to a euro-era record, sparking concern the region’s debt crisis is spreading.
Banks and insurers led losses, with UBS AG (UBSN) and Zurich Financial Services AG slipping more than 2 percent. Adecco SA (ADEN), the world’s largest supplier of temporary workers, fell 3 percent as JPMorgan Chase & Co. reduced its recommendation on the stock.
The Swiss Market Index (SMI), a measure of the largest and most actively traded companies, dropped 1.3 percent to 5,607.85 at the close in Zurich. The gauge has still rebounded 17 percent from this year’s low on Aug. 10 as policy makers increased their efforts to resolve the European fiscal crisis. The Swiss Performance Index lost 1.4 percent today.
“With the current interest-rate level, Italy is not going to be able to brace the burden of interest, even with austerity measures,” said Kai Fachinger, who manages about $750 million at SAM Sustainable Asset Management AG in Zurich. “The decisions taken won’t be enough to avoid a domino effect on Italy.”
The spread between Italian and German bond yields widened to the most since the introduction of the euro as LCH.Clearnet Group Ltd. raised the extra deposit required to trade Italian government bonds and index-linked securities.
The yield on Italy’s five-year note jumped 72 basis points to 7.57 percent and the cost of insuring against default on Italian government debt rose to a record, according to CMA.
Italian Prime Minister Silvio Berlusconi said last night he would step down as soon as parliament passed austerity measures pledged to European Union allies in a bid to convince investors that Italy can curb record borrowing costs. The text of the measures, which the government has yet to present, is due to be approved by parliament in the coming weeks.
“The problems, even with Berlusconi leaving, are definitely not solved,” said Fachinger. “The political situation will remain difficult.”
LCH.Clearnet increased the so-called deposit factor charged for Italian bonds due in seven to 10 years to 11.65 percent. That compares with a charge of 6.65 percent announced in an Oct. 7 document. The additional fees will be applied from close-of-day positions today, LCH said.
“In Italy, the structural improvements so far are just promises,” said Franz Wenzel, chief investment strategist at AXA Investment Managers in Paris. “In addition, LCH Clearnet has raised the margin calls for Italian government bonds. This signals that there is still a lot of uncertainty in this regard.”
Banks and insurers pulled the SMI lower. UBS and Credit Suisse Group AG (CSGN), Switzerland’s largest lenders, slid 2.7 percent to 10.89 Swiss francs and 5.1 percent to 22.20 francs, respectively. Zurich Financial, Switzerland’s biggest insurer, slipped 2.2 percent to 196.60 francs while Swiss Life Holding AG (SLHN) lost 5 percent to 97.55 francs. Swiss Re Ltd., the world’s second-biggest reinsurer, slumped 4.1 percent to 46.98 francs.
Adecco sank 3 percent to 36.46 francs as Robert Plant, an analyst at JPMorgan, cut the company’s shares to “neutral” from “overweight.”
Holcim Ltd. (HOLN), the world’s second-biggest cement maker, retreated 3 percent to 51.05 francs, its lowest price in a month, as Chief Executive Officer Markus Akermann said he sees demand in Europe remaining subdued, though orders aren’t expected to “fall off a cliff.”
Third-quarter operating profit fell 12 percent to 669 million francs ($747 million), missing the average estimate for 673 million francs in a Bloomberg survey. Sales declined 6.1 percent to 5.32 billion francs, a fifth consecutive quarterly decline.
Logitech International SA, the world’s largest maker of computer mice, slumped 5.4 percent to 7.61 francs as interim Chief Executive Officer Guerrino De Luca said the company is continuing to “fix the situation” in Europe, though it’s “not completely solved.” He spoke at Logitech’s investor day in New York today.
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