European Stocks Post Weekly Drop on Debt-Crisis Concern

European stocks posted a second weekly decline as political uncertainty in Italy and Spain revived concern that the nations’ austerity programs may falter and the euro-area debt crisis may deepen.

UniCredit SpA, Italy’s biggest lender, dropped 5.4 percent as a gauge of European bank shares fell for a second week. Royal Imtech NV plunged 47 percent as the Dutch technical-service provider predicted writedowns exceeding 100 million euros ($136 million) in Poland. Hargreaves Lansdown Plc jumped 15 percent after the retail stockbroker posted first-half profit that exceeded analysts’ estimates.

The benchmark Stoxx Europe 600 Index lost 0.3 percent to 287.34 this past week. The gauge has still advanced 2.7 percent so far this year as U.S. lawmakers agreed on a tax-increase deal, delayed spending cuts and avoided a fiscal deadlock that threatened to push the world’s largest economy into a recession.

“The return of uncertainty relating to the euro zone has contributed to increased volatility in European equities and a very weak performance of sectors,” Jeremy Batstone-Carr, head of research at Charles Stanley Group Plc in London, said. “Banks are hugely vulnerable to a still very fragile banking system which is likely to be put under only more pressure if bond yields keep rising, which they are likely to.”

The VStoxx Index, which measures the expected volatility in the region through Euro Stoxx 50 Index options prices, surged 16 percent this week. The average daily volume of shares trading on companies in the Stoxx 600 was 14 percent higher than the mean of the last 12 months.

Italian Elections

An opinion survey in Italy showed the anti-austerity campaign of Silvio Berlusconi has boosted the former premier’s popularity before this month’s elections. Berlusconi narrowed the lead of front-runner Pier Luigi Bersani to less than the margin of error in the poll by Tecne institute for SkyTG24.

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 Prime Minister Mario Monti’s government. Monti has accused Berlusconi of trying to buy votes.

“The expectation is that Berlusconi will roll back on the progress that the center left has made towards reform in the Italian economy,” Batstone-Carr said.

The yield on the benchmark Italian bond advanced 24 basis points, while the FTSE MIB Index plunged 4.1 percent, the biggest weekly loss since September.

Spanish Allegations

Spain is in a turmoil over reports by the newspaper El Pais that Prime Minister Mariano Rajoy received more than €277,000 ($375,000) from a secret fund run by the former treasurer of his People’s Party. Rajoy said on Feb. 2 that he was the victim of a smear campaign.

A poll published by El Pais on Feb. 3 showed the backing for his party fell to 23.9 percent. Seventy-seven percent said they disapproved of Rajoy as the head of government and 54 percent said a general election should be called.

The yield on Spain’s 10-year benchmark bond rose 16 basis points this week. The IBEX 35 Index fell 0.8 percent.

Investors watched central-bank decisions this week for clues on policy makers’ response to the economic slump in the euro area. The European Central Bank and the Bank of England left their interest rates and stimulus measures unchanged.

In Italy, UniCredit tumbled 5.4 percent. Intesa Sanpaolo SpA, the nation’s second-biggest bank, retreated 4.1 percent. A gauge of European bank stocks lost 0.3 percent.

Imtech Writedowns

Royal Imtech dropped 47 percent, for the deepest slump in at least 23 years, according to data compiled by Bloomberg. The company said it has been affected by a lack of financing for its largest customer in Poland and possible irregularities in Imtech’s projects in that country.

Vinci SA slid 6.5 percent. Europe’s biggest builder reported a drop in 2012 profitability amid falling sales in markets such as Poland and said business will stagnate this year because of the economic slump.

Sanofi retreated 4.2 percent as the Paris-based drugmaker said profit may drop as much as 5 percent this year as generic competition to the Plavix blood thinner hurts sales and the company incurs costs for introducing new products.

Royal KPN NV tumbled 23 percent. The Dutch carrier partly owned by Carlos Slim’s America Movil SAB had a fourth-quarter net loss of 162 million euros compared with a profit of 176 million euros a year earlier. The company also plans a $5.4 billion share sale.

Hargreaves Lansdown

Hargreaves Lansdown jumped 15 percent after reporting first-half pretax profit and revenue that beat analysts’ estimates and a 42 percent jump in net inflows to 1.65 billion pounds ($2.6 billion). The company also increased its dividend by 24 percent.

Bwin.Party Digital Entertainment Plc rallied 19 percent. British betting companies climbed after New Jersey Governor Chris Christie, who vetoed Internet gambling in 2011, said he would allow a 10-year trial period of online betting for games conducted in Atlantic City casinos.

Eurasian Natural Resources Corp., a Kazakh metals producer, climbed 12 percent after announcing that ferroalloy and iron ore production rose in the fourth quarter.

Givaudan SA gained 6.4 percent. The world’s largest maker of flavorings and fragrances announced a dividend of 36 francs a share, beating a Bloomberg analyst forecast of 25 francs.

To contact the reporter on this story: Jonathan Morgan in Frankfurt at jmorgan157@bloomberg.net

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

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