Weak Bank, Industrials Drage European Stocks

123jump.com Staff
17 Feb, 2009
New York City

European indexes fall between 2% and 3% at close on the worries that banks in Eastern European countries are weaker than earlier estimated. The banks in Western Europe may suffer as many banks have significant operations in the region.

[R]1:00PM New York, 6:00 Frankfurt – European indexes fall between 2% and 3% at close on the worries that banks in Eastern European countries are weaker than earlier estimated. The banks in Western Europe may suffer as many banks have significant operations in the region.[/R]

European indexes fell for the second day in a row on concerns over credit markets and the global economy.

In Frankfurt trading all of the 30 DAX index shares fell led by banks, pushing the benchmark index lower by 3.4% or 150.04 to 4,216.60.

A gloomy report by Moody’s Investors’ Service on eastern European banks hurt banks in the trading in Europe. Many western banks have subsidiaries in the region. The report offset another report by the ZEW Center for European Economic Research, which showed that investor confidence in Germany improved in February at the fastest rate in 15 years.

Daimler, the world’s second-largest luxury car-maker, also fell 3.1% after posting a pre-tax fourth-quarter loss of 1.53 billion euros, its first quarterly loss since 2007.

Man AG led decliners with a loss of 7.04% followed by losses in Metro of 6.96%, in Allianz SE of 6.93%, in Salgitter of 6.93% and BMW of 6.5%.

In Paris the CAC 40 declined 2.9% or 89.990 to 2,875.23 after an intra-day peak of 2.935.79. Of the 40 index shares, only 4 increased.

Alcatel-Lucent led advancers with a gain of 1% followed by gains in GDF Suez of 0.8%, in L’Oreal of 0.6% and in Peugeot of 0.5%.

L’Oreal SA, the world’s largest manufacturer of cosmetic products, reported that full-year net rose 1% to 2.06 billion euros. However, the company expects demand for cosmetics to fall in 2009.

Societe Generale led decliners with a loss of 9.6% as Moody’s report stocked bank concerns, followed by losses in BNP Paribas of 7.5%, in Arcelormittal of 7.3%, in Renault of 7.2% and Bouygues of 6.4%.

German investor confidence strengthens

The Mannheim, Germany ZEW Center for European Economic Research today said investor confidence in Germany rose in February at the fastest pace since July 1993. The institute said the index of investor and analyst expectations recouped from -31 in January to -5.8 in February.

Despite IMF predictions that economic contraction in Germany will persist throughout 2009, the institute said government efforts to rescue the economy were an important step in instilling investor confidence. In January, the government undertook to spend 80 billion euros on economic recovery initiatives until 2010.

Eastern European banks face downgrades

Moody’s Investors’ Service today said it will downgrade a number of banks in Eastern Europe as concerns heighten that the global economic crisis will be more severe in the region than in the Western Europe.

According to Moody’s the many banks in the former Soviet Bloc region have slipped into an unstable financial position as many of them now relied heavily on short-term funding.

European Markets

In London FTSE 100 Index closed lower 100.62 or 2.43% to 4,034.13, in Paris CAC 40 Index decreased 86.99 or 2.94% to close at 2,875.23 and in Frankfurt DAX index lower 150.04 or 3.44% to close at 4,216.60. In Zurich trading SMI decreased 136.31 or 2.68% to close at 4,941.31.