European Stocks Decline as Borrowing Costs Rise; Banks Retreat

European stocks dropped as Italy’s borrowing costs rose after the nation sold 3 billion euros ($4.1 billion) of bonds at the highest yield since 1997.

UniCredit SpA (UCG) dropped 6.2 percent after Italy’s largest bank approved a 7.5 billion-euro share sale. Banco Bilbao Vizcaya Argentaria SA (BBVA) led Spanish lenders lower as the nation’s borrowing costs climbed. Hochtief AG (HOT) plunged 11 percent after the construction company said the sale of its airport-operating business has been delayed.

The benchmark Stoxx Europe 600 Index retreated 1 percent to 238.47 at the close in London, with all 19 industry groups declining. The cost of insuring against default on sovereign and corporate debt advanced, according to traders of credit-default swaps.

“With Italy now in the firing line, the indications are that the euro-zone crisis is reaching a critical phase as we wait to see how quickly and decisively politicians and the European Central Bank will act,” wrote Peter Sullivan, head of equity research at HSBC Holdings Plc in a report dated today.

Stocks initially climbed after Mario Monti, a former European Union competition commissioner, was appointed Italy’s new prime minister, as the country tackles the euro region’s second-biggest debt.

Photographer: Hannelore Foerster/Bloomberg

Hochtief AG paced declining shares, falling 9.9 percent after the construction company said the sale of its airport-operating business has been delayed. Close

Hochtief AG paced declining shares, falling 9.9 percent after the construction company... Read More

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Photographer: Hannelore Foerster/Bloomberg

Hochtief AG paced declining shares, falling 9.9 percent after the construction company said the sale of its airport-operating business has been delayed.

Silvio Berlusconi resigned after defections ended his parliamentary majority and the country’s 10-year bond yield surged over the 7 percent threshold that prompted Greece, Ireland and Portugal to seek EU bailouts.

Italian Bond Auction

Italy sold 3 billion euros of five-year bonds, the maximum target for the auction, as borrowing costs climbed. The Rome- based Treasury sold the bonds to yield 6.29 percent, the highest since June 1997 and up from 5.32 percent at the last auction on Oct. 13. The yield on five-year Italian notes rose 17 basis points to 6.63 percent following the auction.

In Greece, the nation’s finance minister, Evangelos Venizelos, said his priority is to ensure the country gets a sixth loan under an EU-led bailout after Prime Minister Lucas Papademos took charge of a new interim government.

Spiegel magazine reported that German lawmakers are preparing for Greece’s departure from the euro if the debt- strapped country’s new government doesn’t commit to reforms. The magazine did not say where it got the information.

The Stoxx 600 advanced last week after Italy’s Senate approved austerity measures, easing concern the country would need a bailout. The gauge has still fallen 18 percent from this year’s high on Feb. 17 as policy makers struggle to contain a debt crisis that has Greece on the edge of a default.

Benchmark Equity Indexes

National benchmark indexes fell in 13 of the 18 western- European markets today. France’s CAC 40 Index lost 1.3 percent, the U.K.’s FTSE 100 Index slid 0.5 percent and Germany’s DAX Index dropped 1.2 percent.

UniCredit sank 6.2 percent to 77.4 euro cents after the board approved a share sale to boost capital. The Italian lender also reported a 10.6 billion-euro loss for the third quarter, following almost 10 billion euros in goodwill impairments and writedowns, and said it won’t pay a dividend for 2011.

BBVA, Spain’s second-biggest bank, dropped 3.2 percent to 5.97 euros and Banco Santander SA (SAN), Spain’s largest lender, slid 2.7 percent to 5.65 euros and Bankinter SA (BKT) slipped 2.3 percent to 4.15 euros.

Spain’s government securities also slid, pushing the 10- year yield to 6.11 percent, surpassing 6 percent for the first time since the European Central Bank was said to resume buying the nation’s debt on Aug. 8. ECB Governing Council member Jens Weidmann suggested policy makers should end their support of the region’s most indebted nations.

Hochtief, Q-Cells

Hochtief declined 11 percent to 45.55 euros for the biggest drop on the Stoxx 600 after Germany’s largest construction company said that the “macroeconomic situation” has delayed the sale of its airport-operating unit. The company predicted it will post a net loss if the sale isn’t concluded this year.

Q-Cells SE (QCE) slumped 27 percent to 85 euro cents after the German solar cell and module maker posted a third-quarter loss before interest and taxes of 47.3 million euros, wider than analysts had estimated. Q-Cells also announced the resignation of its chief financial officer Marion Helmes.

Solarworld AG (SWV) dropped 15 percent to 3.29 euros after the company reduced its full-year sales outlook and reported third- quarter Ebit of 20.6 million euros, missing analysts’ estimates.

Davide Campari-Milano SpA (CPR), the maker of Wild Turkey bourbon, slid 7.6 percent to 5.31 euros in Milan trading after reporting slower sales growth in the third quarter than some analysts had estimated because of weakness in Italy.

ITV Plc (ITV) climbed 3.3 percent to 65.75 pence after the U.K.’s biggest terrestrial broadcaster reported a 4.1 percent increase in nine-month revenue to 1.52 billion pounds ($2.4 billion). The company said it is “cautious” about the outlook for the TV market next year.

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

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