European Stock-Index Futures Drop After Italy Downgrade

By Jonathan Morgan 

European stocks fell from a 4 1/2- year high as Fitch Ratings downgraded Italy and China’s retail sales and industrial output missed forecasts. U.S. index futures were little changed, while Asian shares climbed.

Storebrand ASA slumped to a six-month low after Norway’s second-largest insurer said it will need to increase the amount of money it sets aside for longer life expectancy. OMV AG and ICAP Plc fell more than 2.5 percent as analysts downgraded the shares. Ladbrokes Plc (LAD)jumped the most in almost two years after signing a deal with Playtech Ltd. to develop its Web business. The Stoxx Europe 600 Index lost 0.4 percent to 294.37 at 10:22 a.m. in London. The gauge has still surged 5.3 percent this year as U.S. lawmakers agreed on a compromise budget. Futures on the Standard & Poor’s 500 Index retreated 0.2 percent today, while the MSCI Asia Pacific Index jumped 0.7 percent.

“There is without doubt the risk of a drawdown with regards to the strong increase over the previous month,” Roger Peeters, chief executive officer at Close Brothers Seydler Research in Frankfurt, wrote in an e-mail. “But a real trend reversal would be astonishing due to the liquidity flow. On the short term, the trend should remain intact.”

The Stoxx 600 rallied 2.3 percent last week, the biggest advance in two months, as employers in the U.S. increased payrolls more than forecast and optimism mounted that central banks will continue to stimulate their economies. The index closed at the highest level since June 2008.

The number of shares changing hands in companies listed on the Stoxx 600 was 28 percent lower than the 30-day average today, according to data compiled by Bloomberg.

Italy Downgrade

Fitch cut Italy’s credit rating by one level after the close of equity markets on March 8, as last month’s election produced political paralysis that threatens the country’s ability to respond to a recession and the European debt crisis.

The rating company lowered Italy’s government bond rating to BBB+ from A- with a negative outlook. That’s three levels above junk and one higher than Spain, according to data compiled by Bloomberg.

European Union leaders will meet for a March 14-15 summit in Brussels to discuss financial-rescue terms for Cyprus, including the island nation’s debt sustainability and possibly imposing losses on depositors. The gathering comes as Italy struggles to form a government after an inconclusive Feb. 24-25 election and French unemployment sits at a 13-year high.

China Economy

In China, retail sales increased 12.3 percent in the first two months of 2013 from a year earlier and industrial production rose 9.9 percent, the National Bureau of Statistics said. Both numbers trailed economists’ estimates.

French industrial production fell in January as Europe’s second-largest economy teetered on the brink of its third recession in four years. Output dropped 1.2 percent from December, more than the 0.2 percent decline forecast by economists in a Bloomberg survey.

Storebrand (STB) slid 8.6 percent to 24.68 kroner as stricter pension rules will require the insurer to set aside as much as 11.5 billion kroner ($2 billion).

OMV, central Europe’s biggest oil company, declined 2.8 percent to 34.09 euros in Vienna as SocGen downgraded as the stock to hold from buy.

ICAP, the world’s largest broker of transactions between banks, lost 3.5 percent to 330.5 pence as UBS AG downgraded the shares to sell from neutral.

Ladbrokes Gains

Ladbrokes surged 6.8 percent to 240.4 pence, the biggest jump since April 2011, after the U.K. operator of more than 2,000 betting shops said Playtech will help develop and expand its digital business. Playtech rose 3.3 percent to 569.5 pence.

888 Holdings Plc gained 2.7 percent to 162.75 pence as the online gambling company announced a plan to start a division, called All American Poker Network, to introduce its brands into the U.S. market.

Nordex SE soared 13 percent to 4.35 euros, an 11-month high. The German wind-turbine maker reported earnings before interest and taxes of 14 million euros ($18.2 million), compared with the 10.5 million-euro average analyst estimate in a Bloomberg survey, and raised its sales outlook.

To contact the reporter on this story: Jonathan Morgan in Frankfurt atjmorgan157@bloomberg.net

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