Europe open: Italy goes one act too far



LONDON (ShareCast) - - Italian 10 year bond yields higher by 29bp to 4.76 per cent
- Spanish 10 year bond yields rise by 10bp to 5.27 per cent
- Banks deposit 159.8bn euros overnight at ECB

FTSE-100: -1.51%
Dax (Xetra: ^GDAXI - news) -30: -2.01%
Cac-40: -2.52%
FTSE Mibtel 30: -4.35%
Ibex 35: -3.14%
Stoxx 600: -1.30%

European equities took a hit first thing Tuesday morning as the results of this past weekend´s elections in Italy pointed to a hung parliament and - quite possibly - the likelihood of new elections. Worse even, the worry shared by many observers is that the results reflect Italians´ unwillingness to continue on the path of structural reforms.

"In any case, the country which so loves theatre and opera may have gone one act too far," comment analysts at Digital Look.

Commenting on the most recent events, economists at Barclays Research had this to say: "Political instability is likely to prevail in the near term and slow the implementation of much needed structural reforms unless a grand coalition among the PD (center-left), PDL (center-right) and CC (center) parties is formed. (...) Should that condition [a political impasse] persist and the parties not be able to agree on a grand coalition, we think the likelihood of Italy applying for a precautionary credit line would increase."

Similarly, at Unicredit (Milan: UCG.MI - news) they are of the view that: "The resulting situation is extremely complex and it is unlikely to lead to a stable coalition. Some sort of bi-partisan agreement to change the electoral law and then new election seems the most likely outcome. In the meantime, uncertainty will remain high."

Acting as a backdrop, investors are also waiting on this afternoon´s testimony by US Federal Reserve President Ben S.Bernanke before the senate´s banking committee.

Neutral company news flow

German chemicals maker BASF has unveiled fourth-quarter earnings before interest and tax (EBIT), adjusted for one-off items, which rose by 18% to €1.8bn, modestly less than was expected.

French media conglomerate Vivendi (Milan: VIV.MI - news) is moving lower despite having unveiled €28.99bn in revenues for last year, slightly ahead of forecasts.

Fresenius Medical Care (Xetra: 578580 - news) is forecasting 2013 net income to grow by up to 15% over last year's level.

From a sector stand-point the worst performance on the DJ Stoxx 600 is now to be seen in the following industrial groups: Banks (-2.45%), Chemicals (-2.03%) and Insurance (-2.03%).

Weak data in Spain

Spanish mortgage lending dropped by 27.8% in December.

Crude firmly lower

The euro/dollar is now edging slightly higher, by 0.15%, to the 1.3080 dollar mark.

Front month Brent crude futures are now falling by 0.953 dollars to the 113.37 dollar per barrel mark on the ICE.