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European stocks dropped for a second day as Moody’s Investors Service downgraded Spain and Cyprus, while Switzerland’s central bank said that Credit Suisse Group AG must increase its capital this year.
Moody’s cut Spain’s rating by three steps to Baa3 from A3 late yesterday, citing the nation’s increased debt burden, weakening economy and limited access to capital markets. Moody’s also lowered Cyprus’s bond rating to Ba3 from Ba1, attributing the downgrade to the increased likelihood of Greece leaving the euro area. The country’s government may have to give more support to Cypriot banks as a consequence.
The yield on Spain’s 10-year debt rallied as high as 6.998 percent today, the highest since before the Mediterranean nation started using the euro in 1999.
Italy sold 4.5 billion euros ($5.7 billion) of debt, matching its maximum target, at an auction. The country’s Treasury sold 3 billion euros of its three-year benchmark bond to yield 5.3 percent. That compared with a yield of 3.91 percent when it last sold the securities on May 14.
National benchmark indexes gained in 10 of the 18 western- European markets today. The U.K.’s FTSE 100 dropped 0.3 percent and Germany’s DAX slipped 0.2 percent. France’s benchmark CAC 40 added 0.1 percent. Greece’s ASE Index rallied 10 percent for its biggest climb since August.
Nokia slumped 18 percent to 1.83 euros, its lowest price since 1996 and its biggest tumble since 2001. The mobile-phone maker struggling to recover lost market share predicted that second-quarter operating margins at its devices unit will worsen. The company plans to cut as many as 10,000 jobs and close facilities.
Bayerische Motoren Werke AG (BMW), the world’s biggest maker of luxury vehicles, dropped 2.6 percent to 56.29 euros. Daimler AG, the third-largest maker of luxury autos, decreased 2 percent to 33.60 euros. Morgan Stanley reduced its earnings-per-share prediction for the carmakers by 5 percent to 10 percent for 2012 to 2014.
Glencore International Plc and Xstrata Plc slipped 3.8 percent to 341.7 pence and 2.2 percent to 899.6 pence, respectively, as a gauge of mining companies lost 1.1 percent.
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