European Stocks Little Changed on Spain’s Borrowing Costs

European Stocks Drop as Spain’s Borrowing Costs Jump; BBVA Falls
Bankia SA and Banco Bilbao Vizcaya Argentaria SA slumped as a gauge of bank shares posted the biggest decline on the Stoxx Europe 600 Index. Photographer: Angel Navarrete/Bloomberg

European stocks were little changed as the yield on Spain’s benchmark 10-year bond climbed above 7 percent, amid fading optimism that Greece’s election will calm the euro area’s sovereign-debt crisis.

Cable & Wireless Worldwide Plc jumped 7.8 percent after its largest investor said it will accept Vodafone Group Plc’s takeover offer. Banco Santander SA sank 4.6 percent, contributing the most to a retreat by a gauge of bank shares.

The Stoxx Europe 600 Index added 0.1 percent to 244.36 at the close after earlier rallying as much as 1.1 percent and sliding as much as 0.4 percent. The benchmark measure has dropped 10 percent from its peak on March 16 on concern that the euro area’s sovereign-debt crisis has triggered a slowdown in global economic growth.

“The Greek election hasn’t changed many things,” said Stanislas de Bailliencourt, a fund manager at Sycomore Asset Management in Paris, which oversees $2.4 billion. “Difficulties remain and it’s going to be a long process. Spanish bond yields continue to rise. There isn’t a lot of investor appetite for this type of risk. The market remains nervous.”

Spain’s 10-year government bond yields rose as much as 41 basis points to 7.29 percent, the most since the country started using the euro in 1999.

The New Democracy and Pasok parties won enough seats to form a majority in the 300-member parliament, according to the Greek parliament’s speaker, easing concern that the country’s voters would reject the austerity measures needed to qualify for international aid.

Majority Government

New Democracy’s Antonis Samaras will begin his second bid in six weeks to form a coalition.

“The Greek people expressed their will to stay anchored with the euro, remain an integral part of the euro zone and honor the country’s commitments,” Samaras told supporters in Athens after the election result.

Greece’s new government must emerge quickly from yesterday’s contest, euro-area finance ministers said in a statement. Greece’s international monitors will “return to Athens as soon as a new government is in place to exchange views with the new government on the way forward,” the ministers said in their statement.

National benchmark indexes declined in 10 of the 18 western-European markets. The U.K.’s FTSE 100 Index added 0.2 percent, while Germany’s DAX increased 0.3 percent. France’s CAC 40 slipped 0.7 percent.

The volume of shares trading on the Stoxx 600 today was 5 percent higher than the average of the last 30 days, according to data compiled by Bloomberg.

Austerity Time Frame

Speaking before a Group of 20 countries meeting in Los Cabos, Mexico, host President Felipe Calderon said that the club of the world’s biggest economies will increase the $430 billion firewall the International Monetary Fund announced in April.

The leaders will issue a statement at the end of their two-day summit tomorrow.

A spokesman for German Chancellor Angela Merkel queried comments by her foreign minister, Guido Westerwelle, suggesting the EU may give Greece more time to fix its finances. Georg Streiter, Merkel’s deputy chief spokesman, told reporters that “this is not the time for some sort of rebates.”

In France, President Francois Hollande’s Socialist Party and its allies won an absolute majority in the National Assembly, exit polls showed.

Cable & Wireless, Rheinmetall

Cable & Wireless Worldwide jumped 7.8 percent to 37.77 pence, its biggest rally in eight weeks. The company’s largest investor Orbis Holdings Ltd. said it will accept the 1.04 billion-pound ($1.6 billion) takeover offer from Vodafone.

Rheinmetall AG surged 6.7 percent to 36.77 euros following a report in Bild am Sonntag that Saudi Arabia will order 800 Leopard 2 battle tanks. The company makes weapons for the vehicles. Peter Ruecker, a spokesman at Rheinmetall, declined to comment on the report.

Luxury-goods companies gained after Deutsche Bank AG said in a report that the industry has “never had it so good.” Absolute levels of profitability and margins have risen to all-time highs for most brands, the analysts wrote.

Burberry Group Plc, the U.K.’s largest luxury-goods maker, rallied 2.9 percent to 1,346 pence. PPR SA, the owner of the Gucci brand, climbed 1.1 percent to 113.25 euros.

Swatch Group AG, the world’s biggest watchmaker, added 2.3 percent to 369.60 Swiss francs. Berenberg Bank AG initiated the stock with a buy recommendation, saying that the shares will climb to 475 francs and that Swatch may increase its earnings per share and dividend growth at a double-digit pace over the next five years.

Greek, Spanish Lenders

National Bank of Greece SA, the country’s biggest bank, soared 11 percent to 1.50 euros as the ASE Index surged 3.6 percent. Alpha Bank SA rallied 5.2 percent to 1.42 euros.

A gauge of banking shares posted the biggest decline on the Stoxx 600. Santander slid 4.6 percent to 4.70 euros.

Bankia SA, the lender that was nationalized by the Spanish government last month, sank 9 percent to 83.7 euro cents and BBVA retreated 4.2 percent to 5.03 euros. Banca Popolare dell’Emilia Romagna Scrl lost 4.7 percent to 3.66 euros.

Mediobanca SpA said that it retains its cautious view on Spanish banks because they require capital and the country’s government has yet to say how it will use the EU bailout money. Lloyds Banking Group Plc slid 3.6 percent to 30.16 pence.

Carrefour SA slipped 3.2 percent to 14.03 euros after Chief Executive Officer Georges Plassat said it will take at least three years to turnaround the company. The world’s second-largest retailer may abandon its operations in Turkey and cede control in Indonesia, Plassat said, speaking at his first meeting with shareholders since taking the job last month.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE