European Debt Crisis – Stocks and the euro slid as Italy’s borrowing costs increased to a euro-era record at an auction today, deepening concern Europe will struggle to contain its debt crisis. German bunds rose, while copper climbed as Japan’s economy grew for the first time in a year.
The Stoxx Europe 600 Index dropped 1 percent as UniCredit SpA slid on plans to sell shares. The euro weakened 0.9 percent to $1.3628. The yield on the Italian five- year bond rose 17 basis points and Spanish 10-year rates surged to a euro-era record above German yields.
Italy sold 3 billion euros ($4.1 billion) of five-year notes priced to yield 6.29 percent, the highest since June 1997. U.S. stocks extended declines after German Finance Minister Wolfgang Schaeublesaid Europe’s permanent bailout fund may not be implemented before 2013 and German Chancellor Angela Merkel’s party voted to offer euro states a way to leave the currency area.
“There’s still a lot of work to be done to make Italy an ongoing financial viable situation,” Kevin Shacknofsky, who helps manage about $5 billion for Alpine Mutual Funds in New York. “At some point, the market will end up becoming a bit desensitized to it. At the moment, it’s still taking the cues from Europe.”
European SharesItaly’s FTSE MIB Index lost 2 percent and Spain’s IBEX 35 sank 2.2 percent to lead European national benchmarks lower. More than four shares fell for every one that gained in the Stoxx 600. Hochtief AG sank 11 percent after Germany’s largest construction company delayed the sale of its airport operating business and reported third-quarter earnings that missed estimates.
UniCredit SpA (UCG), Italy’s biggest bank, slid 6.2 percent after announcing plans to raise as much as 7.5 billion euros ($10.3 billion) by selling new shares to boost capital. The bank reported a 10.6 billion-euro loss for the third quarter after almost 10 billion euros in goodwill impairments and writedowns, and said it won’t pay a dividend for 2011.
The yield on Italy’s 10-year bond increased 25 basis points to 6.70 percent, compared with a euro-era record last week of 7.48 percent. Demand at today’s auction was 1.47 times the amount on offer, compared with 1.34 times last month, when the yield was 5.32 percent. Former European Union Competition Commissioner Mario Monti was asked yesterday to set up a government faced with trying to cut the euro region’s second- biggest debt.