ECONOMY

European stocks drop as Greece’s ASE tumbles after vote results

European stocks fell, led by a slump in Greece’s ASE Index as the nation faces early elections after Prime Minister Antonis Samaras failed a third time to get enough backing for his presidential candidate.

The Stoxx Europe 600 Index lost 0.2 percent to 343.13 at 11:18 a.m. in London, after sliding as much as 0.8 percent. The Greek benchmark gauge plunged 8.4 percent and as much as 11 percent, the most among 18 western-European markets.

“This is bad news for Greece and the euro zone,” said Raimund Saxinger, who helps oversee $22 billion as a fund manager at Frankfurt-Trust Investment GmbH. “The next thing to watch is how the campaigning and the polls will evolve over the next few weeks.”

The Stoxx 600 is down 1.2 percent this month, on pace for its first December decline since 2008, while the ASE is heading for its lowest close since November 2012.

In a third and final vote, Samaras failed to get enough votes to back his presidential candidate, Stavros Dimas. Now parliament will be dissolved and general elections called, raising concern that the winner will be anti-austerity party Syriza, which seeks to renegotiate the nation’s debt. Such an outcome could put at risk the European Union’s common currency and the start of the European Central Bank’s bond-buying plan.

Short bets on an exchange-traded fund tracking Greek shares climbed this month to the highest level since May 2012, just before the benchmark ASE fell to a low in the wake of the nation’s debt restructuring.

Volatility expectations for European equities jumped, with the VStoxx Index up 15 percent. Benchmark stock indexes of Italy, Spain and Portugal slid more than 1 percent. Germany’s DAX Index declined 0.5 percent.

Annual Gains

This month’s drop in the Stoxx 600 is trimming its annual advance to 4.6 percent. The benchmark gauge rallied in the past two weeks as energy shares rebounded from a slump, the Federal Reserve said it will be patient in the timing of interest-rate increases and the U.S. economy expanded more than forecast. It closed 2 percent below an almost seven-year high reached Dec. 5.

European markets were closed on Dec. 25 and Dec. 26 for the Christmas holiday and Boxing Day.

Banks are contributing the most to the drop in the Stoxx 600 today, with Italian and Spanish lenders leading the declines. Greece’s Eurobank Ergasias SA, Attica Bank and Piraeus Bank SA sank more than 15 percent.

Stoxx 600 commodity producers gained 1.4 percent, the most among 19 industry groups, with Rio Tinto Group climbing 2.4 percent and BHP Billiton Ltd. rising 2.8 percent. Health-care stocks added 0.7 percent as a group. Novo Nordisk A/S gained 1.6 percent as the U.S. Food and Drug Administration approved its Saxenda weight-loss drugs.

[Bloomberg]