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European stocks tumbled the most in more than three months as Spanish and Italian banks retreated with the nations’ government bonds amid signs of returning political uncertainty in the region’s weakest economies.
Newspaper El Pais last week published allegations of illegal cash payments, featuring extracts from handwritten ledgers by the former People’s Party Treasurer Luis Barcenas showing payments to officials including Rajoy. The premier, who is facing opposition calls to resign, visits Berlin today before a European Union summit begins on Thursday.
The yield on 10-year Italian debt increased 14 basis points to 4.47 percent. Berlusconi yesterday promised to abolish a property tax valued at about 4 billion euros ($5.4 billion) if elected in the Feb. 24-25 ballot, in an effort to roll back austerity implemented by Prime Minister Mario Monti.
National benchmark indexes declined in all of the 18 western European markets, except Greece and Denmark. Italy’s FTSE MIB Index sank 4.5 percent, the most in six months. Spain’s IBEX 35 slid 3.8 percent for a sixth day of declines, the longest losing streak in 10 months. France’s CAC 40 plunged 3 percent for the biggest drop since April. The U.K.’s FTSE 100 dropped 1.6 percent and Germany’s DAX lost 2.5 percent.
Santander plunged 5.7 percent to 5.69 euros in Madrid while Banco Bilbao Vizcaya Argentaria SA fell 4.7 percent to 6.97 euros. Yields on Spanish 10-year securities climbed 23 basis points to 5.44 percent today as Rajoy denied corruption and strategists from Commerzbank AG recommended reducing holdings of the nation’s debt.
In Italy, UniCredit tumbled 8.3 percent to 4.25 euros as UBS AG downgraded the shares to neutral from buy. Intesa Sanpaolo SpA, the nation’s second-biggest bank, retreated 5.4 percent to 1.38 euros.
Royal Imtech NV plunged 48 percent to 10.20 euros, the largest drop since at least 1989. The Dutch provider of infrastructure for stadiums said it may have to book writedowns of at least 100 million euros because of alleged irregularities at its Polish business.
Swatch Group AG added 5 percent to 543.50 francs, its highest price since at least 1993, after the biggest maker of Swiss watches reported a 26 percent increase in 2012 net income to 1.6 billion francs. That beat the average analyst estimate of 1.49 billion francs in a survey as the company produced more watches and took advantage of expanded production capacity at its factories.
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