Financial companies led the steepest drop in Czech shares in seven months as electoral deadlock in Italy spurred concern the euro area’s debt crisis will worsen.
Erste Group Bank AG of Austria tumbled 3.4 percent by the close in Prague, while Komercni Banka AS declined 3.3 percent and Vienna Insurance Group AG slid 2.1 percent. The PX index, where the three companies have a combined 57 percent weighting, fell 2.1 percent, its biggest slump since July 23.
Lenders and insurers were the biggest decliners in European stock market trading while Italy’s borrowing costs hit a three-month high as inconclusive elections threaten to derail 15 months of budget cuts under Prime Minister Mario Monti. Silvio Berlusconi, the ex-premier fighting a tax-fraud conviction, got the second-most votes after the pro-austerity Democratic Party.
“New voting could favor Berlusconi, whose support rocketed before the elections because of Monti’s unpopular austerity,” Marek Hatlapatka, a stock analyst at Cyrrus brokerage in Brno, Czech Republic, wrote in a report to clients today. “That is very negative information for stocks and the euro.”
Komercni Banka, which owns about 7.9 billion koruna ($406 million) of Italian sovereign bonds, had its worst day this month. The Czech unit of Societe Generale SA slid to 3,916 koruna, paring February gains to 2.6 percent. Komercni share turnover was 159 percent of the three-month daily average.
“While risk premiums on Italian bonds rose today, they remain well below last year’s levels,” Hatlapatka wrote in an e-mail to Bloomberg News. “I can’t see a reason for a bigger selloff in Komercni Banka shares because of Italian bonds.”