Italian stocks retreated the most in five months as UniCredit SpA (UCG) and Intesa Sanpaolo SpA (ISP) led a decline in financial shares amid speculation the European sovereign-debt crisis is worsening.
The benchmark FTSE MIB Index (FTSEMIB) sank 5 percent to 14,458.88 at the close in Milan, the largest drop since Nov. 1. The gauge climbed 14 percent in 2012 through March 19 as investors bet the European Central Bank’s $1.3 trillion longer term refinancing operation, or LTRO, would stop credit markets from freezing and help lenders. Since March 19, the measure has lost 16 percent.
“The bears are in charge again,” said Filippo Garbarino, who oversees $50 million at Frontwave Capital Ltd. in Chiasso, Switzerland. “Bank balance sheets should have been de-risked, but exactly the opposite happened. The LTRO was used to buy even more government bonds of insolvent countries, so systemic risk is even higher.”
Italian banks led a gauge of European lenders lower, with UniCredit, the nation’s biggest bank, dropping 8.1 percent to 3.04 euros, and Intesa Sanpaolo, the second-largest, falling 7.9 percent to 1.14 euros. Banca Popolare di Milano Scarl (PMI) slumped 6.8 percent to 32.8 euro cents.
Italian bonds retreated, pushing the yield on the 10-year securities up 23 basis points to 5.67 percent. That increased the additional yield investors demand to hold the securities over similar-maturity German bunds to more than 400 basis points for the first time since Feb. 16.
A2A SpA (A2A) declined 8.2 percent to 51.2 euro cents, its lowest price since at least July 1998. Standard & Poor’s cut the utility’s long-term corporate, senior unsecured issue rating to BBB from BBB+ and kept its outlook negative.
Equita called it “bad news” as the company has deadlines to refinance at the end of 2013 and early 2014.
STMicroelectronics NV (STM) sank 8.2 percent to 5.33 euros, the largest drop since August, after Europe’s largest semiconductor maker reduced its gross margin forecast because of an arbitration award.
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