U.K. Stocks Tumble on Italian Election Impasse

U.K. stocks dropped to the lowest level in more than two weeks, led by a selloff in financial companies, as Italy’s election stalemate reignited concern that the euro area’s debt crisis will worsen.

HSBC Holdings Plc (HSBA), Europe’s largest bank by market value, and Barclays Plc (BARC) both lost more than 2 percent as Italian bond yields climbed the most in 14 months. Schroders Plc (SDR), Europe’s largest publicly traded money manager, fell 3.1 percent.

The FTSE 100 Index sank 84.93 points, or 1.3 percent, to 6,270.44 at the close in London, its lowest level since Feb. 8. The broader FTSE All-Share Index also lost 1.3 percent today, while Ireland’s ISEQ Index gained 0.5 percent.

“Italy’s election results are turning out far less clear cut than markets would have liked, with the center-left parties winning a clear majority,” said Jeff Taylor, head of European equities at Invesco Perpetual in London. “Unhappy stock markets and higher Italian bond yields are a certainty for a while as the doubtless lengthy haggling between the political parties takes center stage.”

The results in Rome showed pre-election favorite Pier Luigi Bersani won the lower house by less than a half a point while Silvio Berlusconi, the former premier who has vowed to reverse austerity measures, won a blocking minority in the Senate. An Italian government requires a majority in both houses.

Italy’s Debt

The results may lead Italian President Giorgio Napolitano to install an interim government to write a new election law before calling further elections. Italy’s 10-year government bond yield climbed as much as 44 basis points to 4.93 percent, its biggest daily increase since Dec. 19, 2011.

The increase in borrowing costs “is a clear indication that traders are concerned that the next prime minister will not be as pro-Europe as Monti,” said David Madden, a market analyst at IG in London. “The Italian economy is almost as big as the U.K., so if there are any more doubts about their financial health we are likely to see another wave of selling, potentially reigniting the euro-zone debt crisis.”

HSBC dropped 2.3 percent to 713 pence, its biggest selloff since July 2012. Barclays, the U.K.’s second-biggest bank, sank 4.7 percent to 297 pence, while Royal Bank of Scotland Group Plc slid 4.3 percent to 339.5 pence.

Schroders led a decline by money managers, decreasing 3.1 percent to 1,980 pence. Aberdeen Asset Management Plc (ADN) declined 2.5 percent to 424.7 pence and Man Group Plc dropped 4.3 percent to 101.9 pence.

Provident Financial

Provident Financial Plc (PFG) fell 3.7 percent to 1,468 pence. The U.K.’s biggest subprime lender reported a 12 percent increase in full-year pretax profit to 181.1 million pounds ($274 million), matching the 181 million-pound average analyst estimate, according to data compiled by Bloomberg.

Whitbread Plc (WTB) lost 3.7 percent to 2,469 pence after the owner of Premier Inn budget hotels and Costa Coffee shops reported like-for-like sales growth of 2.7 percent for the 14 weeks to Feb. 14. Chief Executive Officer Andy Harrison said Premier Inn will face more competition.

Redrow Plc (RDW) led housebuilders lower, falling 3.5 percent to 188.9 pence, even after the company reported a 50 percent increase in first-half pretax profit to 23 million pounds. The company said it plans a “modest final dividend” at the end of the year. The stock had surged 18 percent from the beginning of the year through yesterday.

Persimmon Plc declined 1.5 percent to 885.5 pence and Barratt Developments Plc (BDEV) retreated 1.1 percent to 235.5 pence.

Sports Direct

Sports Direct International Plc (SPD) dropped 5 percent to 409 pence after Chairman Mike Ashley sold 25 million shares in the U.K.’s largest sporting-goods retailer at 400 pence a share. Goldman Sachs Group Inc. placed the shares via an accelerated bookbuilding process.

St. Modwen Properties Plc sank 11 percent to 248.6 pence as JPMorgan Chase & Co. and Numis Corp. placed as many as 20 million shares on behalf of the company. The proceeds will be used to help fund the redevelopment of Nine Elms, which includes the New Covent Garden Market site.

GKN Plc (GKN) rallied 3.6 percent to 261.3 pence, one of 14 companies on the FTSE 100 (UKX) to have advanced today. The supplier to Boeing Co. and Airbus SAS jetliners reported a 19 percent increase in pretax profit for 2012 to 497 million pounds.

The volume of shares changing hands in companies on the FTSE 100 was 15 percent greater than the past 30 days, data compiled by Bloomberg showed.

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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