UniCredit Shares Halted in Milan as Italian Banks Extend Losses
July 12, 2011, 3:56 AM EDT
By Dan Liefgreen
July 12 (Bloomberg) -- UniCredit SpA was temporarily halted after falling as much as 7 percent in Milan as Italian banks extended losses. The Italian Exchange generally halts trading of a stock when fluctuations exceed 5 percent from the opening price. Milan-based UniCredit, Italy’s biggest bank, is trading at its lowest level since March 9, 2009. Intesa Sanpaolo SpA, the country’s No. 2 lender, declined as much as 7.3 percent and was trading at 1.44 euros, down 5.6 percent, as of 9:27 a.m.
Italy Plunge Brings Debt Crisis to EU’s Biggest Borrower
July 12, 2011, 7:09 AM EDTBy Andrew Davis
July 12 (Bloomberg) -- The plunge in Italian markets overshadowed policy makers’ efforts to fix Greek finances as the euro-region’s debt crisis infected Europe’s largest borrower.
Italian bonds fell for a seventh day and the nation’s borrowing costs jumped by more than half at an auction of 6.75 billion euros ($9.4 billion) of bills today. Stocks pared declines after falling to a two-year low. Warnings by Moody’s Investors Service and Standard & Poor’s over Italy’s ability to trim debt, coupled with infighting in Silvio Berlusconi’s government over a budget-cutting plan, fueled the sell-off.
“Italy coming under severe market pressure, being the third-largest economy and a founding member of the EU, signals that the sovereign and banking crisis has reached a deeply systemic phase,” Vladimir Pillonca, an economist at Societe Generale SA in London, wrote in a note to investors today.
The rout in Italy underscored Europe’s inability to contain the crisis that began in Greece in October 2009 and led to bailouts in Ireland and Portugal. Finance ministers last night failed to agree on how to share with creditors the cost of a second bailout for Greece to be financed primarily by its European Union allies, including Italy.
...The yield on 10-year Italian bonds rose 7 basis points to 5.76 percent, after reaching 5.96 percent earlier, the highest since 1997. The yield premium investors demand to hold the debt over German bunds to a euro-era reached a euro-era record 348 basis points, before narrowing to 311....Trading in shares of UniCredit SpA, Italy’s biggest bank, had to be suspended limit down after the stock plunged more than 7 percent, pushing the benchmark FTSE MIB index down as much as 4.8 percent. UniCredit, one of the biggest holders of Italian bonds, pared losses and advanced 4.5 percent to 1.206 euros as of 11:40 a.m. in Milan. Even with the rebound, UniCredit has fallen by 22 percent this month, shedding about 9 billion euros in market value.
...Italian bond yields are nearing “disaster,” according to Gary Jenkins, head of fixed-income at Evolution Securities Ltd. Greece, Ireland and Portugal all sought international assistance after their 10-year yields rose past 7 percent.
Italy has more than 500 billion euros of bonds maturing in the next three years. That’s about twice as much as the 256 billion euros extended to Greece, Ireland and Portugal in their three-year aid programs.
At almost 120 percent of gross domestic product, Italy’s debt is the EU’s second largest by that measure after Greece. Its 1.8 trillion euros of borrowing in nominal terms is more than the combined debt of Greece, Spain, Portugal and Ireland.