European Markets Plunge Again; Banks Drop 10%

Arthi Gupta
19 Aug, 2011
New York City

European indexes extended losses tracking the Asian and U.S. markets. The indexes in France, Germany and UK dropped between 3% and 5% dragged by a steep sell-off in the banking sector.

[R]1:30 PM Frankfurt – European indexes extended losses tracking the Asian and U.S. markets. The indexes in France, Germany and UK dropped between 3% and 5% dragged by a steep sell-off in the banking sector.[/R]

European indexes slumped more than 4% after investors focused on the weak U.S. economic data and questioned the health of the euro-zone banking system. The markets were weak at the opening after Asian markets plunged between 2.5% and 6% and feeble jobless claims, home sales and a regional manufacturing data in the U.S.

Market jitters were also compounded after one medium bank in Europe decided to tap $500 million emergency loan facility available from the European Central Bank. Though the borrowed amount is relatively small, it nevertheless put investors on the edge and the index in Germany dropped as much as 4.5% in the early trading.

The Federal Reserve Bank of New York’s decision to investigate the U.S arms of many European banks led to a steep sell-off yesterday of bank stocks renewing concerns about the state of the banks in the region.

Separately, European Central Bank Executive Board member Juergen Stark was quoted as saying in an interview with the German daily Handelsblatt that lower interest rates and common euro bonds is not a solution to the euro-zone debt crisis.

In Paris CAC-40 Index slumped 83.76 to 2.72% to 2,991.89 and in Frankfurt DAX Index plunged 192.14 or 3.43% to 5,410.98.

For the week, the CAC-40 Index plunged 6.9% and the DAX Index plummeted 10.9%.

Banks led the market sell-off on the worries that more bad debt related losses may be in the making.

Dexia gained 0.96%, Societe Generate plunged 10.47%, BNP slumped 7.18%, Deutsche Bank slumped 6.99%, UniCredit declined 3.98%, and Intesa Sanpaolo declined 10.03%.

German PPI Rises

German producer price inflation increased 5.8% from a year ago in July as against the 5.6% rise in June, data from the Federal Statistics Office showed on Friday, driven by a 10.6% annual surge in producer prices of energy.

Gainers & Losers

Autonomy Corp. PLC surged 74.04% to 2,487 pence after the UK infrastructure software firm confirmed that it has received a $10 billion or £6 billion takeover bid from Hewlett-Packard.

Constantin Medien AG slumped 3.07% to €1.48 after the Germany-based broadcasting holding company sued, former owner of F1, Bernie Ecclestone and his business partners over the sale of F1 to CVC Capital Partners six years ago, the Financial Times reported on Thursday.

Corio NV declined 1.61% to €36.10 after the Dutch real estate company reported first-half net rental income rose 11.4% to €195.9 million compared to €175.8 million last year.

Technip SA fell 3.74% to €57.73 on negative comments from a broker.