European stocks dropped for a second day as Moody’s Investors Service downgraded Spain and Cyprus, while Switzerland’s central bank said that Credit Suisse Group AG must increase its capital this year.
Credit Suisse slumped 10 percent to its lowest price since 1992. British Sky Broadcasting Group Plc and BT Group Plc tumbled 3.5 percent each, after winning the rights to show live English Premier League soccer matches by paying an extra 70 percent. Nokia Oyj plunged 18 percent after reducing its outlook for the second quarter.
The Stoxx Europe 600 Index dropped 0.3 percent to 241.84 at the close of trading, extending its slide from this year’s high on March 16 to 11 percent.
“The big news obviously is Spain is ticking up, so the question is how long can they sustain this before having to go back for more funds,” said Chris Beauchamp, a market analyst at IG Index in London. “It’s the rising yields and then you factor in the Italian yields and then obviously you have the Greek elections so you’ve got a perfect storm brewing.”
The VStoxx Index, a measure of Euro Stoxx 50 Index options prices, slipped 2.5 percent to 33.01, snapping three days of gains. The volume of shares trading on the Stoxx 600 today was 18 percent higher than the average of the last 30 days, according to data compiled by Bloomberg.
National benchmark indexes gained in 10 of the 18 western-European markets today. The U.K.’s FTSE 100 dropped 0.3 percent and Germany’s DAX slipped 0.2 percent. France’s benchmark CAC 40 added 0.1 percent. Greece’s ASE Index rallied 10 percent for its biggest climb since August.
Spain’s Credit Rating
Moody’s cut Spain’s rating by three steps to Baa3 from A3 late yesterday, citing the nation’s increased debt burden, weakening economy and limited access to capital markets. Moody’s also lowered Cyprus’s bond rating to Ba3 from Ba1, attributing the downgrade to the increased likelihood of Greece leaving the euro area. The country’s government may have to give more support to Cypriot banks as a consequence.
The yield on Spain’s 10-year debt rallied as high as 6.998 percent today, the highest since before the Mediterranean nation started using the euro in 1999.
Italy sold 4.5 billion euros ($5.7 billion) of debt, matching its maximum target, at an auction. The country’s Treasury sold 3 billion euros of its three-year benchmark bond to yield 5.3 percent. That compared with a yield of 3.91 percent when it last sold the securities on May 14.
Credit Suisse reduced its estimate for China’s growth to 7.7 percent from 8 percent, while Deutsche Bank AG lowered its forecast to 7.9 percent from 8.2 percent, according to research notes. The predictions indicate that China’s economy will expand at the slowest pace since 1999.
Credit Suisse Plunges
Credit Suisse tumbled 10 percent to 17.01 Swiss francs, its biggest decline since 2008, as the Swiss National Bank said it needed a “marked increase” in capital this year to prepare for risks from a possible escalation of the euro area’s sovereign-debt crisis.
BSkyB sank 3.5 percent to 671 pence, the biggest plunge since November, after its pay-TV Sky channel increased its spending to retain the rights to show most Premier League games. Sky will show 116 matches out of 154 available from the 2013-14 season. The company will pay 760 million pounds ($1.2 billion) for each of the three years of the new Premier League agreement.
BT lost 3.5 percent to 201.7 pence, its largest drop since November, after the phone and broadband company won the rights to show 38 matches for 246 million pounds per season.
Nokia, BMW, Daimler
Nokia slumped 18 percent to 1.83 euros, its lowest price since 1996 and its biggest tumble since 2001. The mobile-phone maker struggling to recover lost market share predicted that second-quarter operating margins at its devices unit will worsen. The company plans to cut as many as 10,000 jobs and close facilities.
Bayerische Motoren Werke AG, the world’s biggest maker of luxury vehicles, dropped 2.6 percent to 56.29 euros. Daimler AG, the third-largest maker of luxury autos, decreased 2 percent to 33.60 euros. Morgan Stanley reduced its earnings-per-share prediction for the carmakers by 5 percent to 10 percent for 2012 to 2014.
Glencore International Plc and Xstrata Plc slipped 3.8 percent to 341.7 pence and 2.2 percent to 899.6 pence, respectively, as a gauge of mining companies lost 1.1 percent.
Teleperformance SA, a French call-center company, fell 1.4 percent to 17.77 euros, its third day of losses. The stock was cut to underperform, meaning investors should sell the shares, from outperform at CA Cheuvreux.
Umicore SA declined 3.1 percent to 36.37 euros. The world’s largest recycler of precious metals was downgraded to neutral from outperform at Credit Suisse, meaning that investors should not buy more of the stock.
National Bank of Greece SA, the country’s largest lender, soared 26 percent to 1.31 euros as bets showed that New Democracy, the party that backs the terms of both bailouts from the European Union, may win the election on June 17.
Petropavlovsk Plc surged 14 percent to 469.9 pence, its largest rally since October 2009. The Russian gold producer increased its 2012 production target by 20,000 ounces.