European stocks sank as the U.S. faced the first government shutdown in 17 years and Italian Prime Minister Enrico Letta fought to save his administration. Asian shares and U.S. index futures retreated.
UniCredit SpA and Intesa Sanpaolo SpA (ISP), Italy’s biggest banks, dropped more than 4 percent as the nation’s benchmark FTSE MIB Index tumbled 2.2 percent. Rio Tinto led mining companies lower after a measure of Chinese manufacturing missed a preliminary estimate.
The Stoxx Europe 600 Index fell 0.7 percent to 310.02 at 8:05 a.m. in London. The gauge has still climbed 4.3 percent in September as the Federal Reserve held off from trimming its monthly asset purchases. It has surged 8.8 percent since the end of June, heading for the biggest quarterly gain in four years. Standard & Poor’s 500 Index futures retreated 0.8 percent today, while the MSCI Asia Pacific Index sank 1.5 percent.
“The news flow has turned decisively negative in the last few days,” Chris Weston, chief market strategist at IG in Melbourne, wrote in an e-mail. “In Europe, all five ministers Silvio Berlusconi requested to resign did so, and a confidence vote is now scheduled for Wednesday. The U.S. budget negotiations and fiscal cliff look no better, and are the main point of concern from clients today.”
The U.S. government stands poised for its first partial shutdown since 1996 at midnight tonight, after a weekend with no signs of negotiations or compromise from either the House or Senate to avert it.
The House of Representatives voted 231-192 yesterday to tie a delay in many central provisions of President Barack Obama’s health-care changes to an extension of government funding through Dec. 15. Should the Senate reject the bill today the government could cease some functions from tomorrow.
A federal shutdown would reduce fourth-quarter economic growth by as much as 1.4 percentage points, depending on its length, economists said, as government workers from park rangers to telephone receptionists are furloughed. The Office of Management and Budget estimated 30 days of shutdowns in 1995 and 1996 cost more than $1.4 billion, or $2.09 billion in today’s dollars.
In Italy, UniCredit lost 4.3 percent to 4.57 euros and Intesa Sanpaolo tumbled 4.9 percent to 1.50 euros. Letta said he’ll request a confidence vote for Oct. 2 to try to save his five-month-old administration after Silvio Berlusconi withdrew his support from the ruling coalition and pulled his ministers from cabinet.
A gauge of basic-resources shares was the third-worst performer in the Stoxx 600. Rio Tinto and BHP Billiton Ltd. retreated 2 percent to 3,060 pence and 1.4 percent to 1,815 pence, respectively.
A Chinese manufacturing gauge rose to 50.2 for September compared from 50.1 in August, according to a Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics. The reading missed the preliminary estimate of 51.2. Fifty is the threshold between contraction and expansion.