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European Stocks Are Little Changed After Italian Election

By Namitha Jagadeesh and Corinne Gretler
February 25, 2013 12:28 PM EST 6 Comments
Most European Stocks Rise Amid BOJ Speculation, Italian Election
Most European Stocks Rise Amid BOJ Speculation, Italian Election

European stocks closed little changed as investors scrutinized post-election polls for signs of who will control Italy’s government.

Pearson Plc dropped the most since July as the publisher of the Financial Times newspaper predicted operating profit will stagnate in 2013. Reckitt Benckiser (RB/) Group Plc slid 3 percent after U.S. regulators gave rivals approval to produce generic versions of its Suboxone heroin-dependency treatment. Deutsche Boerse AG jumped the most in nearly eight months as CME Group Inc. was said to have approached the exchange over merger talks.

The Stoxx Europe 600 Index (SXXP) decreased less than 0.1 percent to 288.40 at the close of trading. The gauge earlier rallied as much as 0.7 percent and declined 0.6 percent amid conflicting projections of whether former Italian Prime Minister Silvio Berlusconi, who has pledged to roll back austerity measures, would be able to block Pier Luigi Bersani from forming a government. Italian prime ministers require control of both houses of parliament.

“The more the results come in, the more the fear grows that Italy will become ungovernable,” said John Plassard, vice president at Mirabaud Securities LLP in Geneva, which oversees about $28 billion. “Investors are concerned about Italy’s improvements if Berlusconi should win, as one can’t forget that he’s not pro-European and could stop or delay the ongoing reforms. The last thing we need for the euro area would be renewed political instability in Italy.”

Italian Election

Italy may be left with a hung parliament after today’s election. Berlusconi may have won the Senate race in the key swing regions of Sicily, Campania and Lombardy, according to an IPR projection based on partial vote counts released by polling stations. That contrasts with an instant poll published earlier by SkyTG24 Tecne that gave Sicily and Campania and a possible majority in the Senate to Bersani. The SkyTG24 Tecne poll said Lombardy was too close to call.

The Stoxx 600 is still on course for a ninth month of gains, the longest winning streak since 1997, as U.S. lawmakers agreed on a compromise budget and European Central Bank President Mario Draghi pledged to defend the euro. The gauge has risen 0.4 percent in February.

National benchmark indexes advanced in 14 of the 18 western European markets. Germany’s DAX jumped 1.5 percent, France’s CAC 40 added 0.4 percent and Italy’s FTSE MIB increased 0.7 percent. The U.K.’s FTSE 100 climbed 0.3 percent even as Moody’s Investors Service stripped the nation of its top Aaa credit rating.

Volume Rises

The volume of shares changing hands in Stoxx 600 companies was 17 percent greater than the 30-day average, data compiled by Bloomberg show.

Euro-region stocks are missing this year’s global rally as the correlation between the Euro Stoxx 50 Index and the MSCI All-Country World Index of 45 developed and emerging markets has fallen to 77 percent. That’s the lowest level since the collapse of Lehman Brothers Holdings Inc. in 2008, according to data compiled by Bloomberg.

Pearson retreated 3.7 percent to 1,171 pence, the biggest drop since July 27, after saying it expects tough market conditions to continue this year. The company forecast 2013 operating profit will be in line with 2012, when earnings fell.

Reckitt Benckiser slid 135 pence to 4,381 pence, the biggest drop since May, after saying two unnamed manufacturers received approval from the U.S. Food and Drug Administration to produce generic Suboxone tablets in the world’s largest economy.

The drug faces generic competition after losing U.S. patent protection in 2009, which Reckitt Benckiser has said would eliminate as much as 90 percent of tablet revenue and about 20 percent of the film-strip version.

Deutsche Boerse

Deutsche Boerse jumped 5.6 percent to 49.30 euros, the biggest gain since June 29. CME has approached the Frankfurt- based exchange to consider starting merger talks, according to four people familiar with the situation who asked not to be identified as the information is private.

Frank Herkenhoff, a spokesman for Deutsche Boerse in Frankfurt, and Allan Schoenberg, a spokesman for CME in London, declined to comment.

Elan Corp. surged 6.9 percent to 8.52 euros, the highest price in more than three months. RP Management LLC, an investor in royalty streams from pharmaceuticals, said it’s willing to buy the Irish drugmaker for about $6.5 billion.

PostNL Gains

PostNL advanced 6.6 percent to 1.97 euros, the biggest advance since Jan. 21, after reporting fourth-quarter earnings before interest and taxes of 219 million euros ($290 million). That beat the 144 million-euro average analyst forecast in a Bloomberg survey.

BP Plc gained 1.6 percent to 451.2 pence as a U.S. trial over the 2010 Gulf of Mexico oil spill began today. The U.S. and Gulf states are considering a $16 billion accord with BP over pollution fines and natural-resource damages claims, the Wall Street Journal reported on Feb. 22, citing unidentified people familiar with the matter.

Scott Dean, a spokesman for BP, declined to comment, as did Joy Patterson, a spokeswoman for Alabama Attorney General Luther Strange, and Amanda Larkins, spokeswoman for Louisiana Attorney General Buddy Caldwell.

To contact the reporters on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net; Corinne Gretler in Zurich at cgretler1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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