ECB Lowers Rate to 2%, European Markets Fall

Darlington Musarurwa
15 Jan, 2009
New York City

UK and European markets fell on the worries that the banks may need more capital and financial crisis is likely to get worse before it stabilzes. HSBC, Barclays, Deutsche Bank and RBS declined. The ECB lowered key lending rate 50 basis points to 2% and indicated near term uncertainty remains high.

[R]1:00PM New York, 6:00PM London - U.K. stocks fall on worries over deepening global recession. European Central Bank cuts interest rates by 50 basis points to 2%. SABMiller lager volumes decline 1% in Q3.[/R]

London stocks fell on a weakness in financial stocks and a growing fears of a deepening global economic recession.

In London trading FTSE 100 index declined 1.8% or 74.81 to 4,105.83.

Of the FTSE 100 index stocks, 36 increased, 65 dropped, and one was unchanged. Old Mutual led gainers in the index shares with a rise of 8% followed by Antofagasta gaining 4.1% as gold prices rose $4.10 to $813 per ounce.

Other commodity stocks gained. Xstrata climbed 1.7% and Rio Tinto jumped 1.5%.

ECB Cuts Interest Rates by 50 basis points to 2%

European Central Bank''s Governing Council today decided to lower the interest rate on the main refinancing operations of the by 50 basis points to 2%. Interest rates since October 8 have been lowered by 2.25%.

The Bank also said “the level of uncertainty remains exceptionally high.”

“Since September 2008 the financial market turmoil has intensified and broadened. Tensions have increasingly spilled over from the financial sector into the real economy.

We continue to see global economic weakness and very sluggish domestic demand persisting in the coming quarters as the impact of the financial tensions on activity continues,” said ECB.

SABMiller Lager Volumes Decline 1% in Q3

SAB Miller reported today in interim management statement for the third quarter ending December 31, 2008 that larger volumes gained 1% from a year ago and 2% ahead for the year-to-date.

On an organic basis, lager volumes for the third quarter declined 1%.

Lager volumes rose 2% in Latin America in the review period as volumes in Peru increased 14% from the same period a year ago on a growing market share. In Ecuador lager volume advanced 15%. However volumes dropped 6%.

In Romania volume growth plummeted 11%. Also organic volumes in Russia slid 22% on de-stocking of wholesaler inventories which began in September and a sharp economic downturn.

In addition volumes dropped 1% in Czech Republic. Poland achieved domestic volume growth of 2%.

MillerCoors U.S. domestic sales to retailers on a pro forma basis fell 2.3%. Premium light brand volumes were shed 2.4%.

Coolers Light STRs were up 1%, while Miller Lite STRs fell 7.5%.

In Africa and Asia businesses, organic lager volumes climbed 2% in the quarter. China organic volumes were flat, with growth in the Chinese economy slowing.

In Africa lager volumes grew 4% on an organic basis with growth in most major markets with the exception of Botswana where volumes declined significantly following the imposition of a social tax levy on all alcohol products on November 1.

Also growth in Tanzania eased to 7% in the period.

In South Africa lager volumes grew 1% in the third quarter and soft drink volumes grew 11% over a prior year period affected by stock shortages.

Gainers & Losers

Old Mutual led gainers in the FTSE 100 index shares with a rise of 8.1% followed by increases in Antofagasta of 4.1%, in Imperial Tobacco of 3.6%, in Standard Chartered of 2.8%, and London Stock Exchange of 2.7%.

Commodity stocks rose as metal prices rallied.

Lloyds TSB Group led decliners in the FTSE 100 index shares with a drop of 11.7% followed by losses in Barclays of 8.2%, in HSBC Holdings of 7%, in TUI Travel of 6.8%, and Land Securities of 5.8%.

Europe Markets Review

In London FTSE 100 Index closed lower 59.53 or 1.42% to 4,121.11, in Paris CAC 40 Index decreased 56.12 or 1.84% to close at 2,995.88 and in Frankfurt DAX index lower 85.62 or 1.94% to close at 4,336.73. In Zurich trading SMI increased 3.63 or 0.07% to close at 5,382.44.