Autos, Banks Drag Europe, UK Lower

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

European market indexes declined sharply across the region. Automakers and banks led the decliners list on the worries that GM may be faced with the prospect of bankruptcy and Chrysler and Fiat must agree on terms of collaboration before the receipt of $6 billion bailout aid.

[R]1:00PM New York, 6:00 Frankfurt – European market indexes declined sharply across the region. Automakers and banks led the decliners list on the worries that GM may be faced with the prospect of bankruptcy and Chrysler and Fiat must agree on terms of collaboration before the receipt of $6 billion bailout aid.[/R]

European stocks fell led by banks and carmakers after all members of DAX 30 and CAC 40 index shares fell in Frankfurt and Paris trading as news from the US battered market sentiment.

US President, Barak Obama, refused to give General Motors Corp. and Chrysler LLC, the country’s two of the three largest carmakers, more aid opting to cede tax incentives to consumers for new car purchases. The prospect of bankruptcy forced GM down 25% and Chrysler was asked to collaborate with Fiat to receive $6 billion in aid. If GM I forced into bankruptcy and Ford and Chrysler may have to look at bankruptcy advantages too.

US Treasury Secretary Timothy Geithner also suggested that recent quantitative easing would not be enough to save banks as more money would still be needed for stabilization. The comments dragged banks sharply lower in Japan, Europe and U.S.

Automakers, Bayerische Motoren Werke AG and Daimler AG in Germany and Renault and Peugout in France tumbled on the news. Peugeot may consider partnership deal to withstand recession.

The European Commission in Brussels today reported that consumer and industry confidence in Europe fell to a record low in March.

ArcelorMittal, France’s largest steelmaker and the world’s largest fell 9.6% after a report that the company’s second quarter sales may fall. ArcelorMittal recently priced nearly 2 billion euros convertible bonds and may need as much as 4 billion euros if the economies do not recover in the second half of this year.

The euro slid further to $1.3164 and pound dropped 1% to $1.418 and gained to 92.68 pence against per euro.

Market Sentiment

In Frankfurt trading the DAX 30 Index slumped 5% or 214.32 to 3,989.23, the largest decline since the beginning of the year and all index shares closed lower.

Commerzbank led decliners with a loss of 16.8%, followed by losses in Deutsche Bank AG of 8.9%, in Daimler AG of 7.6%, in Allianz SE of 7.6% and Bayerische Motoren Werke AG of 7.3%.

In Paris trading the CAC 40 fell 4.3% to 2,719.34 after all index shares incurred losses.

Distressed bank, Dexia, led decliners with a loss of 13.2%, followed by losses in Credit Agricole of 10%, in ArcelorMittal of 9.6%, in Michelin of 9.3% and Renault of 9.1%.

Industry and Consumer Confidence in Europe Falls to Record Low

The European Commission in Brussels today said consumer and industry confidence in Europe fell to a record low in March as a result of the global economic crisis.

In the Euro area, the index of executive and consumer sentiment fell from 65.3 in February to 64.6 in March.

Bloomberg also reported that retail sales in Germany, the region’s largest economy, fell for the tenth month in a row. The Bloomberg Purchasing managers’ index, based on a survey of 500 executives compiled by Markit Economics, declined from 45.4 in February to 44.4 in March.

Spain was forced to bail out a bank after savings bank could not find a buyer. The Bank of Spain took over Caja Castilla-La Mancha and the government offered loan guarantees of 9 billion euros. Spain has been battling one of the worst recessions in the last five decades after the bursting of construction bubble and a surge of unemployment to a high of 14%.

In UK, Nationwide Building Society agreed to acquire Scotland based Dunfermline Building Society. The move was arranged by the UK government with financial assistance of 1.6 billion pounds.

The Confederation of British Industry estimated job cuts of 15,000 in the second quarter of this year based on a survey of 90 banks, brokers, building societies and insurers. The financial services industry employs 1.05 million people and about 34% of the companies have lowered their optimism since the last survey in December.

Europe Markets Review

In London FTSE 100 Index closed lower 135.94 or 3.49% to 3,762.91, in Paris CAC 40 Index decreased 121.28 or 4.27% to close at 2,719.34 and in Frankfurt DAX index lower 214.32 or 5.10% to close at 3,989.23. In Zurich trading SMI decreased 126.57 or 2.60% to close at 4,745.76.