European Markets Extend Losses; German Survey Points to Recession

Devan Biswas
18 Oct, 2011
New York City

European markets extended losses for the second day as investors turned cautious after Germany cooled the expectations ahead of the economic summit this weekend. German survey showed a growing chance of a mild recession in the next two quarters. Milan judge rejected a court case against Berlusconi.

[R]4:50 PM Frankfurt – European markets extended losses for the second day in a row as investors turned cautious after Germany cooled the expectations ahead of the economic summit this weekend. German survey showed a growing probability of a mild recession in the next two quarters. Milan judge rejected a court case against Berlusconi.[/R]

European indexes extended losses for the second day in a row after investors turned cautious ahead of the economic summit this weekend. China’s slowdown also contributed to the market nervousness.

The details of “Grand Plan” are still vague and France and Germany are at odds with the timetable of recapitalizing banks.

Separately a private survey indicated investors’ sentiment in Germany fell to a 3-year low in October with the rising worries on the debt crisis.

The ZEW showed economic sentiment dropped to -48.3 from -43.3 in September, the eighth monthly decline in a row.

The survey data contributed to the renewed speculation that Germany and the euro zone will have a soft recession in the fourth quarter of 2011 and in the first quarter of 2012.

German government is expected to release its economic forecast on October 20.

CAC 40 index decreased 0.8% or 24.71 to 3,198.70 and DAX 30 index added 36.21 or 0.6% to 5,895.64. Market indexes in Switzerland declined 0.5%, in Sweden fell 0.2% and in Milan rose 0.6%.

Milan judge rejected a case against Prime Minister Silvio Berlusconi that focused on embezzlement of airwave licenses charges of 35 million and 8 million in tax fraud related to the company Mediaset controlled by him.

In a rare victory for Berlusconi, the judge ordered his son Pier Silvio and Fedele Confalonieri to stand for a trial. Prime Minister Berlusconi is still fighting three other cases.

The euro declined to $1.368.

Stock Movers

Air France – KLM declined 2.8% to €5.45 after the company reshuffled its management and appointed a new chief executive. However, 100,000 strong employees union said it will seek more clarity on the cost cuts plan of €800 million and flight attendants are threatening to strike as early as next week.

Jean-Cyrill Spinetta will continue as chairman and resume his previous position as chief executive and bring back Leo Van Wijk as deputy chief who orchestrated the merger of KLM with Air France.

BNP Paribas SA declined 5% to €29.66, Societe Generale edged lower 5.2% to €19.21 and Credit Agricole fell 3.6% to €4.90.

ArcelorMittal declined 3.1% to €13.36 and Thyssen Krupp AG fell 2% to €20.03.

Volkswagen AG increased 0.6% to €101.80, Daimler AG fell 0.9% to €36.18 and Renault SA declined 1.8% to €26.16.

Bayer AG increased 1.1% to €44.44 and BASF SE added 0.6% to €50.82.

Statoil ASA added 0.6% after the Norway based oil explorer said its North Sea oil field Aldus Major has a “significant oil field” and the company will release more accurate estimate in a couple of weeks. Its partner Lundin Petroleum estimated the field to carry as much as 1.2 billion barrels to 2.6 billion barrels of equivalent energy.