Stocks retreat after Italy's borrowing costs soar

Eurostoxx 50:2,288.32 (–36.49) Frankfurt DAX:5,985.02 (–72.01) Paris CAC:3,108.95 (+40.43)

EUROPEAN STOCKS dropped yesterday, as Italy’s borrowing costs rose after the nation sold €3 billion of bonds at the highest yield since 1997.

The benchmark Stoxx Europe 600 Index fell 1 per cent with all 19 industry groups except health-care companies declining.

The cost of insuring against default on sovereign and corporate debt rose, according to traders of credit-default swaps.

“With Italy now in the firing line, the indications are that the euro zone crisis is reaching a critical phase as we wait to see how quickly and decisively politicians and the European Central Bank will act,” wrote Peter Sullivan, head of equity research at HSBC Holdings.

Stocks initially climbed after Mario Monti, a former European Union competition commissioner, was appointed Italy’s new prime minister.

Italy sold €3 billion of five-year bonds as borrowing costs climbed. The Rome-based Treasury sold the bonds to yield 6.29 per cent, the highest since June 1997.

Spiegel magazine reported that German law makers are preparing for Greece’s departure from the euro if the new government does not commit to reforms.

UniCredit sank 6.2 per cent to €77.4 after its board approved a share sale to boost capital.

BBVA, Spain’s second-biggest bank, dropped 3.2 per cent to €5.97.

Banco Santander, Spain’s largest lender, slid 2.7 per cent to €5.65.

Bankinter dropped 2.3 per cent to €4.15.

Hochtief fell 11 per cent to €45.55, the biggest drop on the Stoxx 600 after Germany’s largest construction firm said the “macroeconomic situation” has delayed the sale of its airport-operating unit.

Q-Cells slumped 27 per cent to €85 after the German solar cell and module maker posted a third-quarter loss before interest and taxes of €47.3 million.

Solarworld slid 15 per cent to €3.29 after the company reduced its full-year sales outlook.

Davide Campari-Milano, the maker of Wild Turkey bourbon, slid 7.6 per cent to €5.31 in Milan trading after reporting slower sales growth in the third quarter than some analysts had estimated because of weakness in Italy. – (Bloomberg)