European markets moved lower across the board today as a wave of fear over the ECB’s disunity and cracks in bank earnings caused investors to sell. A weak trading calendar left stocks largely in the hands of the US and continuing fears surrounding the central bank.
Europe Session Key Developments
• Investors Uneasy on ECB Split
• Positive Bank Earnings Come with Future Concern
• Energy and Metals Tumble
European Stocks Fall as Investors Remain Wary of Quick Recovery
European markets moved lower across the board today as a wave of fear over the ECB’s disunity and cracks in bank earnings caused investors to sell. A weak trading calendar left stocks largely in the hands of the US and continuing fears surrounding the central bank. Concern remains especially high in the fragile euro-region as investors see sharp differences in the sentiment of councilmembers. Some, including Germany’s Axel Weber, do not wish to see the rate lowered further while others see a lower rate as just one necessity along with asset purchases. The extent of the recession for Europe remains unknown despite confidence that the region’s largest trading partner, the United States, will see growth in the second half of the year and into the next. Further shifts in sentiment came as Bank of America reported its first quarter results. The US’s largest bank by total assets reported a hefty $4.25B net income largely on the back of trading and refinancing gains from acquisitions including Merrill Lynch and Countrywide. While investors have seen several positive reports from banks in recent weeks, the news came with concern as the credit card services unit of the bank posted a $1.77B loss. Also, investors remain skeptical that large trading gains, tax benefits, and refinancing gains will be sustainable through year-end. As the real economy worsens with rising unemployment and declining wealth, banks are starting to see losses in safer loans and credit card defaults that may cause further distress in the months to come.
FTSE 100 3,990.86 -101.94 -2.49%
The UK index saw a triple digit decline today to close just under the 4,000 level. All sectors closed lower with financials and basic materials seeing declines in excess of five percent. Despite positive earnings from major banks in the US including JPMorgan and Goldman Sachs, investors remain wary that the feedback of economic weakness will cause safer bank assets and credit cards to see rising default rates. Bank of America today made this fear very real when its credit card unit reported a $1.77B loss. Barclays fell nearly eight percent on the day, however the largest losers were found in mining and resources tied to falling base metal prices. Eurasian Natural led declines with 12.26%, while Xstrata fell 11.10%. Also high on the list was travel firm Thomas Cook, which declined 11.39% on news that the company will sell-off or restructure its premium department stores.
CAC 40 2,969.40 -122.56 -3.96%
The French index posted a nearly four percent decline that led to a close of under 3,000. Nearly all sectors and stocks closed lower with drugmaker Sanofi-Aventis posting the only gain, albeit a small 0.87%. Leading sharp declines were basic materials and technology with sharper than seven percent moves followed by a 6.54% drop in financials. The largest loser of the day was lender Dexia which closed 11.78% lower. Trailing the firm were other large companies including steelmaker ArcelorMittal, down 11.08%, and automaker Renault, which fell 10.33%.
DAX 4,486.30 -190.54 -4.07%
The German market managed to close more than four percent lower as all sectors fell and three closing with more than five percent declines. No stock managed to close in the green, although no firm saw a double digit percentage decline. Stock exchange Deutsche Boerse closed down 9.69% trailed by steelmaker Salzgitter’s 8.70% drop. Also seeing significant downside were Deutschebank and Truckmaker MAN group both falling more than eight percent. With concern still high on financials and corporate profits, it remains to be seen if the sell-off continues in the weeks ahead.
IBEX 35 8,718.20 -312.00 -3.46%
Spain’s leading index fell more than three percent on the day led by greater than four percent moves in oil & gas and financials and declines in all sectors. As in other markets, the sectors face investor concern over the safety of financial firms in the quarters ahead and a fall in commodities precipitated the decline in energy firms. Leading the loses however was TV station operator Gestevision Telecinco with an 8.18% decline. Investors continue to sell shares of the company as it considers merging with rivals to lessen competition based losses.
S&P/MIB 17,731.00 -779.00 -4.21%
Trading in the Italian market led to the largest decline of the five major indices tracked. All sectors fell on the session with the minimal loss of 2.12% in consumer goods and a sharp 8.46% fall in technology. Energy cable maker Prysmian fell the most on the session with a 9.28% decline as base metals moved lower. Leading the tech sector lower was Europe’s largest semiconductor maker, STMicroelectronics, which tumbled 8.46% on investor caution as US chipmaker Texas Instruments prepares to report later in the day.
