Swiss Stocks Drop Amid Wrangling Over Italian Government

Swiss stocks posted their biggest decline in a week as former Italian Premier Silvio Berlusconi said his allies would leave the country’s cabinet, while the U.S. faced its first government shutdown in 17 years.

Syngenta AG decreased 1.4 percent after Citigroup Inc. lowered its recommendation on the world’s largest maker of crop chemicals. Aryzta AG posted its biggest gain in six months as the owner of bakery businesses reported revenue for the 12 months through July that exceeded analysts’ estimates.

The Swiss Market Index fell 0.4 percent to 8,022.6 at the close of trading in Zurich. The equity benchmark still climbed 3.6 percent in September, extending its gain this quarter to 4.4 percent, as the Federal Reserve refrained from reducing its monthly bond purchases. The gauge has rallied 18 percent so far in 2013, the third-best performance by a European developed market. The broader Swiss Performance Index also slipped 0.4 percent today.

“The main topic in Europe is Italy,” said Alessandro Fezzi, a senior market analyst at LGT Bank Schweiz AG in Zurich. “Investors don’t quite understand why one had to push the country into a political crisis now. In the U.S., the budget dispute is also adding to the uncertainty. I still see a possibility of a last-minute deal.”

Letta’s Government

In Italy, Prime Minister Enrico Letta said he will request a confidence vote for Oct. 2 in an attempt to build a new parliamentary majority. Silvio Berlusconi withdrew his support from the ruling coalition on Sept. 28, calling on the five ministers from his party to leave the cabinet. The government had relied on the votes of lawmakers from the People of Liberty party to pass new legislation.

The U.S. government faces its first partial shutdown since 1996 at midnight tonight after a weekend without signs of a compromise between the House of Representatives and the Senate.

The House voted 231-192 yesterday to make further funding for the federal government conditional on the suspension of the central provisions of President Barack Obama’s health-care legislation. Should the Senate reject the bill today, the government may shut down from tomorrow.

That would reduce fourth-quarter economic growth by as much as an annualized 1.4 percentage points, depending on its length, according to economists. The Office of Management and Budget estimated that the 30 days of shutdown in 1995 and 1996 cost the government $1.4 billion, or $2.09 billion in todays’ money.

Syngenta, Roche

Syngenta fell 1.4 percent to 369.40 Swiss francs as Citigroup lowered the stock to neutral from buy. The brokerage said in a note that “lower grain prices are likely to have an impact on the crop-protection market.” Citigroup reduced its forecasts for earnings-per-share growth for Syngenta for this year, 2014 and 2015.

Swiss Re Ltd., the world’s second-largest reinsurer, dropped 1.5 percent to 74.80 francs, while Swiss Life Holding AG lost 1.7 percent to 171.20 francs. A gauge of insurers listed on the Stoxx Europe 600 Index retreated 1 percent. Baloise Holding AG fell 1.4 percent to 100 francs.

Aryzta advanced 4 percent to 60.45 francs. Sales rose to 4.5 billion euros ($6.1 billion), beating the average analyst projection of 4.43 billion euros. The company also forecast that underlying fully diluted earnings per share will increase by at least 10 percent in the 12 months through July 2014.

Basilea’s Isavuconazole

Basilea Pharmaceutica AG jumped 4.9 percent to 78 francs, the highest price in almost six weeks, as the drug developer said an antifungal treatment may get approval for sale by 2015. A final-stage clinical study showed that the isavuconazole treatment wasn’t inferior to an existing medicine. The company may file for regulatory approval in early 2014 and the treatment could reach the market in late 2014 or 2015, Chief Executive Officer Ronald Scott said.

“The positive results of the first and most important phase-III study of isavuconazole mark an important milestone for Basilea,” David Kaegi, an analyst at J. Safra Sarasin in Zurich, wrote in a note to clients today. “The data will prompt investors to increase the likelihood of approval for isavuconazole and estimates for Basilea substantially.”

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