UK Economy Contracts, European Orders Plunge

123jump.com Staff
27 Mar, 2009
New York City

Banks drag European shares. Carmakers rebound. The UK statistics office lowered its estimate of fourth quarter GDP decline on a sharply higher decline in construction activities. Barclays surged 24% on the media speculation that regulators believe that the troubled bank has enough capital for now.

[R]1:00PM New York, 6:00 Frankfurt – Banks drag European shares. Carmakers rebound. The UK statistics office lowered its estimate of fourth quarter GDP decline on a sharply higher decline in construction activities. Barclays surged 24% on the media speculation that regulators believe that the troubled bank has enough capital for now.[/R]

European stocks fell with banks, industrials and energy companies leading the decliners.

After six days of gains in a row, profit-taking and negative market sentiment and weak read on the UK economy dragged markets in the region lower.

UK economy, Europe’s largest export market, contracted the most in 29 years on falling retail and construction activity.

BNP Paribas, Societe Generale and Credit Suisse in France; UBS in Switzerland and Deutsche Bank in Germany closed on the downside.

Barclays surged 24% in London trading on the media speculation that the bank may not need additional capital after it is likely to have met the regulatory requirements in the latest review.

Energy stocks also tumbled after the price of crude tumbled to $52 per barrel. The euro slid to $1.3329.

Carmakers gained after market watchers at French bank, Societe Generale, recommended car shares as a strong buy. News that South Korea was taking measures to prop up the automotive sector also boosted market sentiment. The measures announced include tax incentives and flexible consumer lending for new purchases.

Daimler and BMW rose in Frankfurt trading while Renault, Peugeot and Fiat climbed higher in Paris.


Eurostat, the European Union’s statistical bureau, today said that new orders for the Eurozone manufacturers fell 34.1% in January from a year ago month and from the previous month.

UK economy Shrinks

The Office of National Statistics revised its estimate of fourth quarter UK GDP decline to 1.6% from the previous estimate of decline of 1.5%. The decline was deeper than previously estimated on the fall by 1% in consumer spending and 4.9% fall in construction activities.

The ONS lowered estimate of decline from a year ago to 2% from the 1.9% previous estimate. However the weakness in manufacturing and service industry declines were slightly better than previously estimated by the construction activities fall estimate was lowered by more than four times.

The UK government is expected to issue more than 300 billion pounds of debt in the next two fiscal years and the Bank of England is expected to fund half of that with the help of printing new money.

Gainers & Losers

In Frankfurt trading the DAX 30 Index retreated with 6 index members gaining, 24 declining and none were unchanged.

Metro AG led decliners in the DAX 30 index with a loss of 5% followed by losses in Adidas AG of 4.4%, in ThyssenKrupp AG of 4.4%, in SAP AG of 4% and in Allianz SE-AG of 3.4%.

Commerzbank led gainers in DAX 30 index with a rise of 4.8% followed by gains in BMW of 3.2%, in MAN AG of 1.2% and in Daimler AG of 1.1%.

In Paris trading the CAC 40 fell 1.8% to 2,840.62 after losses across the board pared gains in automotive stocks.

Renault led advancers with a gain of 4% followed by gains in Michelin 3.6%, Dexia of 3.5%, in ST Microelectronics of 2% and Peugeot of 1.7%.

CAP Gemini led decliners with a loss of 10.4%, followed by losses in Air France-KLM of 7.7%, in Societe Generale of 4.7%, Credit Agricole of 4.2% and Accor of 3.4%.

In London trading, FTSE 100 index declined 0.7% or 26.35 to 3,898.85. Of the stocks in the FTSE index, 26 declined, 74 increased and 2 were unchanged.

Eurasian Natural led decliners in the FTSE 100 index with a loss of 7.5% followed by losses in Prudential Plc of 5.8%, in ICAP Plc of 4.6%, in International Power Plc of 4.6% and in Kzakhmys Plc of 4.6%. Anglo American, Lonmin, Sainsbury and Tesco declined more than 4%.

European Auto Sector ‘Ready to Rebound’

Market watchers at French bank, Societe Generale, in a note to clients today said the European automotive sector was “ready to rebound.”

The bank upgraded its weighting of the car industry from “neutral” to “overweight” and urged investors to buy car shares.

Eurozone Manufacturing Activity Tumble

Eurostat, the European Union’s statistical bureau, today said that new orders for the Eurozone’s manufacturers fell 34.1% in January compared to orders placed during the same month a year earlier.

Compared to December, January orders slumped 34.1%. On a year-on-year basis, manufacturing orders dropped the most in 12 years.

The sector is the 16-country region’s main sector and its contraction shows that the recession is deepening.

Europe Markets Review

In London FTSE 100 Index closed lower 26.35 or 0.67% to 3,898.85, in Paris CAC 40 Index decreased 51.45 or 1.78% to close at 2,840.62 and in Frankfurt DAX index lower 55.82 or 1.31% to close at 4,203.55. In Zurich trading SMI decreased 94.41 or 1.90% to close at 4,872.33.