European Stocks Retreat Amid Greece Government Concern
European stocks dropped after the leader of Greece’s biggest political party failed to reach an agreement on a new government following the weekend’s elections.
National Bank of Greece SA led a selloff in banks, falling 8.4 percent. Spain’s Bankia SA (BKIA) dropped 4.8 percent. Taylor Wimpey Plc (TW/) led U.K. builders lower after a gauge of house prices fell to a six-month low. Royal KPN NV surged 17 percent after America Movil SAB offered 2.6 billion euros ($3.4 billion) for a larger stake in the business.
The Stoxx Europe 600 Index (SXXP) slid 1.7 percent to 250.58 at the close in London as the cost of insuring against default on European sovereign and corporate debt advanced. The Stoxx 600 has fallen 8 percent from this year’s high on March 16, paring the gauge’s advance in 2012 to 2.5 percent. The U.K. and Irish markets were closed for a holiday yesterday.
“European political risk remains center stage for financial markets,” wrote Adrian Cattley, a strategist at Citigroup Inc. in a report to clients dated yesterday. Greece’s election result “suggests no quick path to a new stable government and could raise probability of contagion risks.”
The Stoxx 600 rose 0.7 yesterday as German Chancellor Angela Merkel said she will receive France’s president-elect, Francois Hollande, with “open arms.” Stocks briefly erased their losses today after Merkel told Hollande in a congratulatory message that she is confident they can work together to tackle the debt crisis.
The volume of shares changing hands on the Stoxx 600 today was 14 percent higher than the average of the last 30 days, data compiled by Bloomberg show. The VStoxx Index (V2X), which measures the cost of Euro Stoxx 50 Index options, gained 8.3 percent to 31.32, its highest level this year. The gauge closed 19 percent above its average of 26.37 since January 1999.
The euro weakened for a seventh day as Antonis Samaras, the leader of the New Democracy party in Greece, said he failed to reach an agreement to form a government. Alexis Tsipras, the head of Syriza, the second-biggest party, will now attempt to form a coalition government of left-wing parties.
Tsipras said he wouldn’t agree to join forces with New Democracy and Pasok, the two Greek parties that have supported austerity measures in return for international funds, while saying a left-wing coalition government would nationalize banks to spur growth, repeal recent labor reforms and immediately cancel the bailout accords, he said.
“The Greek election result was a vote against a barbaric bailout,” he said in statements televised live on state NET TV. “There will be no 11 billion euros of additional of additional austerity measures; 150,000 jobs will not be cut.”
National benchmark indexes fell in every western-European market except Iceland and Portugal. France’s CAC 40 slid 2.8 percent, the U.K.’s FTSE 100 fell 1.8 percent and Germany’s DAX dropped 1.9 percent. Greece’s ASE Index plunged 3.6 percent to its lowest close since 1992.
National Bank of Greece, the country’s biggest lender, tumbled 8.4 percent to 1.42 euros, extending yesterday’s 8.3 percent slump. Alpha Bank, Greece’s second-largest lender, sank 14 percent to 72 euro cents and EFG Eurobank Ergasias SA dropped 10 percent to 46 cents.
Elsewhere, BNP Paribas SA (BNP), France’s biggest lender, slipped 3.8 percent to 29.07 euros, Banca Monte dei Paschi di Siena SpA (BMPS), Italy’s third-largest bank, slid 4.3 percent to 25.08 euro cents and Germany’s Commerzbank AG lost 3.4 percent to 1.53 euros.
Banks fell as the Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments rose 1.5 basis points to 277 at 8:30 a.m. in London. An increase signals a deterioration in perceptions of credit quality.
Bankia Shares Plummet
In Madrid, Bankia tumbled 4.8 percent to 2.26 euros as Spain’s economy ministry today denied that the state has seized the third-largest lender in the country.
El Confidencial reported that Spain will nationalize Bankia and its parent BFA on May 11. The newspaper cited people in the financial industry familiar with the government’s plan. Joaquin Almunia, the European Commissioner responsible for competition, said “it would seem” that Bankia will get state support.
U.K. builders retreated as a house-price index fell in April, the Royal Institution of Chartered Surveyors said. The gauge dropped to minus 19 from minus 11 in March, according to RICS, which conducts a monthly poll of property surveyors across the country. A reading below zero means more surveyors saw price drops than gains last month.
Taylor Wimpey Slips
ACS-Actividades de Construccion & Servicios SA lost 5.3 percent to 13.49 euros after the Spanish builder reported earnings that missed some analysts’ estimates and a 19 percent increase in net debt to 10.5 billion euros.
Earnings before interest, taxes, depreciation and amortization was 664 million euros for the first quarter. That was 5 percent below N+1 Equities’ estimate and 3 percent below Espirito Santo Investment Bank’s forecast.
KPN surged 17 percent to 7.58 euros, its biggest rally in more than a decade, after America Movil offered 8 euros a share to increase its stake in the Netherlands’ largest phone company to 28 percent. KPN said the offer, which is 23.5 percent more yesterday’s closing price, “substantially undervalues the company.” KPN hired Goldman Sachs Group Inc. and JPMorgan Chase & Co. to help it explore strategic options.
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