European Stocks Drop as Italian Yilds Surge; TDC Retreats

European stocks fell to a three-week low, led by a selloff in banks, as the leader of Italy’s Democratic Party ruled out the possibility that rival politicians will agree on a broad coalition government.

Banca Monte dei Paschi di Siena SpA and Banco Popolare SC slid more than 1 percent as Italian bond yields surged. TDC A/S dropped 1.6 percent as its private-equity owner sold another 6.8 percent stake in the Danish phone company. Safran SA slipped 1.5 percent as the French government sold 13 million shares in the maker of aircraft engines.

The Stoxx Europe 600 Index slid 0.5 percent to 292.44 at the close of trading in London, after earlier rallying as much as 0.4 percent and sliding as much as 1 percent. The gauge climbed in afternoon trading yesterday as better-than-estimated U.S. data bolstered confidence in the world’s largest economy.

“We haven’t taken any positions against Europe, but we think the growth story is just not there at the moment,” Axel Weber, chairman of UBS AG told Francine Lacqua on Bloomberg Television in London. “We think the structural problems are unresolved. I still think there is some potential for equities to improve particularly for the U.S.”

National benchmark indexes retreated in all 18 western-European markets today. France’s CAC 40 dropped 1 percent and Germany’s DAX slid 1.2 percent. The U.K.’s FTSE 100 declined 0.2 percent.

Bond Yields

Italy’s FTSE MIB Index lost 0.9 percent as the leaders of the Five Star Movement said they will not form a coalition government with Pier Luigi Bersani, the leader of the Democratic Party. Bersani won a majority in the lower house of Italy’s parliament last month. He needs additional support in the Senate to form a viable government.

Yields on Italy’s benchmark 10-year bonds surged 21 basis points to 4.78 percent as the meeting left Bersani without the means to assemble a majority in the Senate. He will probably have to strike an alliance with former Prime Minister Silvio Berlusconi by tomorrow or abandon his attempt to form a coalition government.

Monte Paschi, the world’s oldest lender, dropped 4.3 percent to 18.5 euro cents in Milan, Banco Popolare slid 1.3 percent to 97.8 cents. The Euro Stoxx Banks Index declined 1.4 percent to its lowest level since November.

TDC lost 1.6 percent to 44.69 kroner after NTC Holding sold a 2.49 billion-kroner ($427 million) stake in Denmark’s largest phone company. UBS AG placed the 56.3 million shares via an accelerated bookbuild at 44.27 kroner apiece. NTC also sold a 15 percent stake in TDC in February.

Safran, Belgacom

Safran declined 1.5 percent to 34.96 euros as France’s finance ministry sold 449 million euros ($574 million) of shares in Europe’s second-biggest maker of aircraft engines. Societe Generale SA placed the shares at 34.50 euros apiece, according to an update sent to clients that was obtained by Bloomberg News. The stock closed at 35.49 euros yesterday.

Belgacom SA slid 2.4 percent to 19.14 euros as Belgian newspaper De Tijd reported the government has considered selling stakes in some of its assets to help keep the national debt below 100 percent of gross domestic product.

The state may sell a 3.5 percent stake in the mobile-phone operator as well as its holdings in BNP Paribas SA. Belgium owns 10 percent of France’s largest bank, according to data compiled by Bloomberg. BNP Paribas retreated 1.7 percent to 39.67 euros.

Mediaset Rallies

Mediaset SpA jumped 5.3 percent to 1.63 euros even as the Italian broadcaster controlled by Berlusconi reported a full-year net loss and scrapped its dividend for the first time in its history. The company posted sales of 3.72 billion euros, exceeding the average analyst estimate.

TUI Travel Plc rose 4 percent to 322.8 pence after saying the company remains well placed to meet its full-year performance targets. The company said it expects to report operating profit growth toward the upper end of its guidance of 7 to 10 percent. Parent company TUI AG added 2.3 percent to 8.36 euros in Frankfurt.

The volume of shares changing hands in companies listed on the Stoxx 600 was 24 percent greater than the average of the past 30 days, according to data compiled by Bloomberg.

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