European Stocks Drop on Concern Over Italian Austerity

Photographer: Ralph Orlowski/Bloomberg

Traders work on the floor of the Frankfurt Stock Exchange in Frankfurt. Close

Traders work on the floor of the Frankfurt Stock Exchange in Frankfurt.

Close
Open
Photographer: Ralph Orlowski/Bloomberg

Traders work on the floor of the Frankfurt Stock Exchange in Frankfurt.

European stocks declined, reversing earlier gains, as an opinion poll in Italy showed the anti- austerity campaign of Silvio Berlusconi has boosted the former premier’s popularity before this month’s elections.

UniCredit SpA and Intesa Sanpaolo SpA led a drop in Italian shares. Vinci SA, Europe’s biggest builder, slid 3.3 percent after posting a decline in 2012 profitability. ArcelorMittal climbed 1.1 percent. Volvo AB jumped 4.2 percent even after fourth-quarter profit fell as the company predicted its North American and European markets will improve this year.

The Stoxx 600 fell 0.4 percent to 284.52 at the close, after earlier rising as much as 0.4 percent. The equity benchmark has still gained 1.7 percent this year as U.S. lawmakers agreed on a budget deal and data signaled the world’s largest economy is recovering.

“Why is Berlusconi gaining in the polls? It is because he has a populist campaign that goes completely against” Prime Minister Mario Monti’s policies, said Jacques Porta, who helps manage $627 million at Ofi Patrimoine in Paris. “It’s a very, very negative signal vis-a-vis Germany. It’s legitimate to see the market falling.”

Berlusconi narrowed the lead of front-runner Pier Luigi Bersani to 0.3 percentage points, the poll by Tecne institute for SkyTG24 showed. That is lower than the survey’s margin of error of 4 percentage points.

Berlusconi has gained in popularity before the Feb. 24-25 elections as he promised to cut taxes and end a levy on first homes implemented by Monti’s government. Monti has accused Berlusconi of trying to buy votes.

Earnings Scorecard

Stocks earlier rallied as companies from ArcelorMittal to Hargreaves Lansdown Plc posted earnings that beat estimates.

About 52 percent of the 182 western European companies that have posted earnings in the current reporting season beat analysts’ projections for profit, according to data compiled by Bloomberg. Of the 207 that have posted sales, 53 percent exceeded sales forecasts.

In the euro area, Germany won’t stand in the way of aid for Cyprus so long as the Mediterranean nation fulfills the criteria to qualify for help from Europe’s bailout fund, Deputy Finance Minister Steffen Kampeter said. Kampeter’s comments are the strongest signal yet that Chancellor Angela Merkel’s government won’t risk the market turmoil that could result from any rejection of help for Cyprus.

National benchmark indexes slid in 14 of the 18 western European markets. Germany’s DAX fell 1.1 percent. France’s CAC 40 lost 1.4 percent. The U.K.’s FTSE 100 gained 0.2 percent.

Italian Stocks

Italy’s benchmark FTSE MIB Index slipped 0.7 percent. UniCredit declined 1.7 percent to 4.28 euros, while Intesa Sanpaolo retreated 1.6 percent to 1.39 euros.

Vinci dropped 1.21 euros to 35.41 euros. The company reported a drop in 2012 profitability and said business will stagnate this year because of the economic slump. Net income as a percentage of sales dropped to 5 percent from 5.2 percent a year earlier, the company said. Vinci also said it expects revenue to be “flat” in 2013.

ArcelorMittal rose 13 euro cents to 12.56 euros. The world’s biggest steelmaker said earnings before interest, taxes, depreciation and amortization dropped to $1.32 billion in the fourth quarter from $1.71 billion a year earlier. That surpassed the median estimate of $1.25 billion in a survey of analysts. The company expects Ebitda in 2013 to exceed last year’s $7.1 billion as it ships more steel.

Volvo Gains

Volvo added 3.90 kronor to 96.85 kronor even after saying fourth-quarter profit dropped 84 percent. The world’s second- biggest truck manufacturer reported Ebit of 1.12 billion kronor ($177 million), lower than the average analyst estimate of 2.47 billion kronor.

Volvo said it expects the North American and European markets to improve in 2013.

Hargreaves Lansdown jumped 11 percent to 817 pence, its highest price ever. The retail stockbroker reported first-half pretax profit of 93.7 million pounds ($147 million), beating analysts’ projection for 91 million pounds.

Pohjola Bank Oyj, the publicly traded unit of co-operative banking and insurance group OP-Pohjola, slid 5.7 percent to 11.67 euros after warning of possible loan losses. That was the stock’s biggest decrease in 15 months. Pohjola said prospects for growth in its loan portfolio are “dimmer” than last year.

Elisa Oyj tumbled 5.4 percent to 16.14 euros, the most since Oct. 19. The Finnish wireless carrier posted fourth- quarter sales of 396 million euros, missing the average analyst estimate of 405.6 million euros. Ebitda in the first half of 2013 will be slightly less than last year, the company said in a statement.

Eurasian Natural Resources Corp. jumped 9.1 percent to 375.6 pence. The Kazakh metal producer said ferro-alloy and iron-ore production rose in the fourth quarter.

The number of shares changing hands in companies listed on the Stoxx 600 was 16 percent higher than the average of the past 30 days, data compiled by Bloomberg showed.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.