European Equities Head South Over Italian Austerity

European stocks declined, reversing earlier gains, as an opinion poll in Italy showed the anti- austerity campaign of Silvio Berlusconi has boosted the former premier’s popularity before this month’s elections.

UniCredit SpA and Intesa Sanpaolo SpA led a drop in Italian shares. Vinci SA, Europe’s biggest builder, slid 4 percent after posting a decline in 2012 profitability. ArcelorMittal climbed 1.7 percent. Volvo AB jumped 3.8 percent even after fourth- quarter profit fell as the company predicted its North American and European markets will improve this year.

The Stoxx 600 fell 0.7 percent to 283.46 at 2:36 p.m. in London, after earlier rising as much as 0.4 percent. The equity benchmark has still gained 1.4 percent this year as U.S. lawmakers agreed on a budget deal and data signaled the world’s largest economy is recovering.

“Why is Berlusconi gaining in the polls? It is because he has a populist campaign that goes completely against” Prime Minister Mario Monti’s policies, said Jacques Porta, who helps manage $627 million at Ofi Patrimoine in Paris. “It’s a very, very negative signal vis-a-vis Germany. It’s legitimate to see the market falling.”

Berlusconi narrowed the lead of front-runner Pier Luigi Bersani to 0.3 percentage points, the poll by Tecne institute for SkyTG24 showed. That is lower than the survey’s margin of error of 4 percentage points.

Berlusconi has gained in popularity before the Feb. 24-25 elections as he promised to cut taxes and end a levy on first homes implemented by Monti’s government. Monti has accused Berlusconi of trying to buy votes.

Bloomberg

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.