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Swiss Stocks Drop Most in 10 Months After Italy Election

Swiss stocks dropped the most in 10 months amid concern Italy’s inconclusive parliamentary elections will reignite the euro area’s debt crisis.

UBS AG (UBSN) and Credit Suisse Group AG (CSGN), Switzerland’s largest lenders, lost more than 1 percent. Insurers also fell, with Zurich Insurance Group AG and Swiss Re Ltd. slipping at least 1.7 percent. Transocean (RIGN) Ltd., the world’s biggest offshore-rig contractor, dropped to the lowest in more than seven weeks as Macquarie Group Ltd. downgraded the stock.

The Swiss Market Index (SMI) retreated 1.9 percent to 7,449.98 at the close of trading in Zurich, the biggest drop since April 23. The benchmark measure has still jumped 9.2 percent this year as U.S. lawmakers agreed on a compromise federal budget and the Swiss franc depreciated against the euro. The broader Swiss Performance Index fell 1.2 percent today.

“Neither of the two major alliances around Bersani and Berlusconi were able to reach an absolute majority,” Ulrich Wortberg, an analyst at Helaba Landesbank Hessen-Thueringen in Frankfurt, wrote in a note to clients today. “Therefore, high uncertainty remains in the market.”

Silvio Berlusconi, the former Italian premier fighting a tax-fraud conviction and charges of paying a minor for sex, won a blocking minority in the Senate in yesterday’s election. The Five Star Movement, a group founded by stand-up comedian Beppe Grillo obtained 25 percent of the vote in the Chamber of Deputies. Pier Luigi Bersani’s coalition of parties took the most votes in the lower house even as it failed to get the majority needed to pass legislation through the upper house.

Reverse Austerity

Berlusconi and Grillo, the candidates who pledged to reverse the austerity implemented by outgoing Premier Mario Monti, won about 55 percent of the popular vote. The result may lead President Giorgio Napolitano to install an interim government to write a new election law as the prelude to another round of parliamentary elections.

The volume of shares changing hands in SMI-listed companies was 49 percent greater than the average of the last 30 days, according to data compiled by Bloomberg.

Swiss stocks retreated even as U.S. economic reports showed consumer confidence increased more than forecast this month and purchases of new homes jumped to the highest level since 2008 in January.

UBS and Credit Suisse slid 1.6 percent to 14.69 francs and 5 percent to 24.76 francs, respectively. A gauge of banks posted the worst performance of the 19 industry groups in the Stoxx Europe 600 Index (SXXP), dropping 3.1 percent. Julius Baer Group Ltd. (BAER) lost 2.9 percent to 35.22 francs.

Insurers Fall

Zurich Insurance slipped 1.8 percent to 249.60 francs, while Swiss Re fell 1.7 percent to 73.60 francs.

Transocean dropped 4 percent to 47.21 francs as Nigel Browne, an analyst at Macquarie, cut the stock to neutral, the equivalent of hold, from outperform.

Novartis AG (NOVN) was the biggest drag on the SMI, removing 60.29 points from the gauge, as the shares traded without the right to the latest dividend. The drugmaker fell 0.6 percent to 62.30 francs, accounting for the effect of the payment.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

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

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