European stocks fell and Italy’s borrowing costs climbed to a three-month high as the country’s elections stalemate spurred concern the debt crisis will worsen. U.S. equity-index futures rebounded while oil declined.
The Stoxx Europe 600 Index (SXXP) dropped 1 percent at 8:20 a.m. in New York as volume was 43 percent greater than the 30-day average. Standard & Poor’s 500 Index futures added 0.2 percent after the U.S. gauge slid the most since November yesterday. Italy’s FTSE MIB Index fell 4.4 percent, its 10-year bond yields jumped 36 basis points to 4.85 percent after climbing as high as 4.93 percent, and the cost of insuring against default jumped to the highest this year. The euro strengthened less than 0.1 percent to $1.3092. Oil lost 0.8 percent in New York.
Early results suggested Italy’s election would lead to a hung parliament and another vote. Democratic Party leader Pier Luigi Bersani, having campaigned to maintain budget rigor, won control of the lower house but not the Senate, and rival Silvio Berlusconi called for a recount. U.S. Federal Reserve Chairman Ben S. Bernanke is due to testify before lawmakers about monetary policy today and tomorrow.
“The surprising outcome of the Italian election has not only changed Italy’s political landscape,” Hans Redeker, head of global foreign-exchange strategy at Morgan Stanley in London, wrote in a report today. “The impact of the election result will be felt throughout Europe.”
The additional yield investors demand to hold 10-year Italian bonds instead of benchmark German bunds, a measure of perceived risk, increased 43 basis points to 336 basis points. Italy sold 8.75 billion euros ($11.5 billion) of six-month bills today at 1.237 percent, the highest since Oct. 29 and up from 0.731 percent at an auction of similar maturity debt Jan. 29.
Credit-default swaps insuring Italian bonds rose as much as 43 basis points to 293, the highest since Dec. 11.
Spain’s 10-year yield jumped 15 basis points to 5.32 percent and Portugal’s climbed 31 basis points to 6.48 percent. Default swaps on Spain increased 28 to 287 and Portugal’s climbed 25 to 408. Germany’s 10-year yield dropped seven basis points to 1.48 percent.
The Stoxx 600 erased its monthly advance as more than 10 shares fell for each one that advanced. Italian banks UniCredit SpA, Intesa Sanpaolo SpA and Banco Popolare SC sank at least 8 percent.
The Markit iTraxx Financial index of swaps linked to 25 banks and insurers climbed as much as 14 basis points to 164, the highest level since Nov. 28.
Credit-default swaps on Telecom Italia SpA jumped 35 basis points to 364 and the stock dropped 6.3 percent. The nation’s biggest phone company delayed a sale of as much as 3 billion euros ($3.9 billion) of hybrid bonds to boost its balance sheet until after the election.
In the four-way race, pre-vote favorite Bersani won the lower house by less than a half a percentage point. Former premier Berlusconi, who pledged to reverse austerity measures, won a blocking minority in the Senate.
The VStoxx Index (V2X), a gauge of the price of options prices on the Euro Stoxx 50 Index, climbed 16 percent to 24.7, the highest level since September on a closing basis.
S&P 500 futures erased an earlier drop of as much as 0.2 percent, indicating the U.S. stocks gauge will rebound from yesterday’s 1.8 percent slump.
President Barack Obama’s administration released a report yesterday on how $85 billion in automatic spending cuts scheduled to begin next month will degrade programs from defense to education to public health. Even so, there isn’t a measure of money in the U.S. that is forecasting worse times ahead as lawmakers voice alarm that the cuts may damage the economy.
U.S. Commerce Department figures due at 10 a.m. in Washington may show new-home sales climbed in January, according to a Bloomberg survey. House prices in 20 U.S. cities probably rose 6.6 percent in December from a year earlier, the biggest increase since July 2006. The S&P/Case-Shiller index is released at 9 a.m. in New York.
Crude oil in New York fell to $92.39 a barrel before a report that may show U.S. crude inventories rose. European Coal for delivery next year fell as much as 0.5 percent to a record $97.90 a metric ton, according to broker data compiled by Bloomberg. Kansas wheat fell as much as 1 percent to $7.3275 a bushel, the lowest since June 25. Aluminum slumped 0.8 percent and earlier today fell to the lowest price since Nov. 29.
The MSCI Emerging Markets Index (MXEF) sank 1.1 percent, with benchmark gauges in China, India, Russia, Poland, Hungary, the Czech Republic and the Philippines dropping at least 1 percent. Trading volumes were 105 percent higher than the 30-day average for companies in Russia’s Micex Index while Poland’s WIG20 Index was 25 below the average. In Shanghai, 9.5 percent fewer shares changed hands than the 30-day average, while 14 percent more stocks traded in India.