On Monday European stocks dropped after Spain’s ruling party suffered its worst election defeat in 30 years and Standard & Poor’s warned it may downgrade Italy’s debt. U.S. index futures and Asian shares also retreated.
Banco Santander SA, Spain’s largest bank, and Italy’s Mediobanca SpA led a selloff in financial shares, both falling more than 2 percent. Commerzbank AG lost 2.8 percent after the German lender announced a 5.3 billion-euro share sale. Airlines tumbled after Ryanair Holdings Plc reported earnings and a volcanic eruption closed Iceland’s main international airport.
The euro touched a record low against the Swiss franc and reached the lowest in a week against the dollar after Spain’s Socialist Party suffered a defeat in local elections as voters punished Prime Minister Jose Luis Rodriguez Zapatero’s party for soaring unemployment and spending cuts.
The 17-nation currency also fell after S&P on May 20 cut Italy’s credit-rating outlook to negative from stable, citing slowing economic growth and “diminished” prospects for a reduction of government debt.
Italy’s Treasury said in a statement from Rome that it will “intensify” structural changes in the economy and push ahead with measures to balance the budget by 2014.
The airline sector fell as an eruption by Iceland's most active volcano was set to keep the island's main airport shut on Monday, while other European nations watched for any disruption to their air routes from a towering plume of smoke and ash. Low-cost airline Ryanair fell 4.2 percent after it said high fuel costs and a lack of growth in capacity would mean flat earnings in the coming year.
Japan’s Nikkei 225 Stock Average declined the most in six weeks as makers of construction equipment declined after Nomura Holdings Inc. said demand in China will cool.
This article was compiled by Valletta Fund Management Limited, a member of the BOV Group. Valletta Fund Management,
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