Swiss stocks fell as Greece moved closer to a possible exit from the euro currency union and German Chancellor Angela Merkel’s party lost a state election.
UBS AG (UBSN) and Credit Suisse AG paced declines among European lenders. ABB Ltd. (ABBN) slipped after the Sunday Times reported that the world’s largest supplier of power grids is a possible suitor for Invensys Plc. Holcim Ltd. (HOLN), the second-biggest cement company, retreated from earlier gains, losing 1.1 percent as it announced a plan to streamline the purchase of raw-materials and run factories more efficiently.
The Swiss Market Index (SMI) fell 1.3 percent to 5,875.66 at the close of trading in Zurich, extending last week’s drop as the May 6 elections left Greece struggling to form a government, raising questions about that nation’s ability to obtain financial assistance and pay back its debts on time. The Swiss Performance Index slipped 1.4 percent today.
“The risk of another Greek election is almost 100 percent while the biggest party according to polls is against the euro,” said Witold Bahrke, a senior strategist at PFA Pension A/S in Copenhagen, where he helps oversee $55 billion. “Other European politicians are increasingly playing hardball, so the risk of Greece leaving the euro is surely on the rise.”
Greece’s political deadlock looks set to continue for a second week as President Karolos Papoulias failed to secure agreement on a unity government and avert new elections. Syriza, the left-wing group opposed to austerity measures, defied overtures to join the government yesterday.
Finance Ministers Meet
Euro-area finance ministers met at 5 p.m. in Brussels today and may discuss the international bailout for Greece, as well as the situation in Spain, where the government last week made a fourth attempt to clean up the country’s banks.
The debate between growth and austerity will form the centerpiece of talks tomorrow between the newly installed French President Francois Hollande and Merkel, who has championed an agenda of spending cuts.
Merkel’s party was defeated in Germany’s most populous state in an election that helped the Social Democrats tighten their grip on the country’s regional governments.
The SPD, the main opposition party nationally, increased its vote share in yesterday’s ballot in North Rhine-Westphalia. Merkel’s Christian Democratic Union fell to its worst score since World War II.
The People’s Bank of China said the amount of cash banks must set aside as reserves will fall 50 basis points from May 18. This is the third time in six months that the central bank has cut reserve ratios to increase money supply for lending.
UBS and Credit Suisse, Switzerland’s largest lenders, dropped 3.1 percent to 11.10 Swiss francs, and 2.6 percent to 19.29 francs, respectively, as a group of European lenders was among the biggest decliners of industry groups in the Stoxx Europe 600.
ABB declined 1.7 percent to 15.52 francs after the Sunday Times said the Swiss company is among prospective suitors for Invensys Plc, the British maker of controls for washing machines and factory equipment.
Holcim dropped 1.1 percent to 54.60 francs after earlier rising as much as 3.5 percent. Chief Executive Officer Bernard Fontana unveiled a plan to increase operating profit by 1.5 billion francs ($1.6 billion) by the end of 2014 through streamlining the purchasing of raw materials and improving cement factory efficiency.
Holcim joins larger competitor Lafarge SA in seeking to beat sluggish demand in parts of Europe and improve profitability by cutting fuel costs and matching inflation with price increases.
Swatch Group AG slid 3.2 percent to 385.20 francs. Transocean Ltd., the biggest owner of offshore drilling rigs, sank 4.1 percent to 41.60 francs. Oil fell below $94 a barrel in New York for the first time since December as Europe’s debt crisis worsened and Saudi Arabia’s energy minister said prices should decline further.
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