European stocks dropped, briefly falling 20 percent from this year’s high, as Standard & Poor’s downgrade of U.S. debt overshadowed the European Central Bank’s purchase of Spanish and Italian government bonds.
Mining companies, carmakers and technology firms paced the selloff amid concern that the lowering of America’s credit rating will exacerbate an economic slowdown. Spanish and Italian banks advanced after the ECB was said to buy the two country’s government bonds in a bid to tame the region’s debt crisis.
The benchmark Stoxx Europe 600 Index dropped 1.6 percent to 234.97 at 2:38 p.m. in London, after earlier rallying as much as 0.8 percent. The gauge tumbled 9.9 percent last week and has now fallen 19 percent from this year’s high on Feb. 17 to its lowest level since May 2010 amid concern the global economic recovery is at risk.
“Macro is clearly dominating at the moment -- it’s going to feel like we are dipping in and out of a recession for the immediate future,” said David Hussey, head of European equities at Manulife Asset Management who helps oversee $218 billion. “It’s the wrong time to panic; you have to be measured and wait and see.”
European and U.S. stocks last week posted their biggest weekly selloffs since November 2008 as investors fled equities after U.S. manufacturing and consumer-spending data heightened speculation that economic growth may be faltering.
Asian shares extended the global rout today after S&P downgraded the U.S.’s sovereign-debt rating by one level to AA+ on Aug. 5 and maintained its “negative” outlook, citing political failure to reduce record deficits.
Group of Seven
The Group of Seven nations pledged to “take all necessary measures to support financial stability and growth,” seeking to head off a collapse in investor confidence. Officials will inject liquidity and act against disorderly currency moves as needed, they said in a statement after a call late yesterday European time.
Even so, national benchmark indexes retreated in all 18 western European markets. France’s CAC 40 Index (CAC) dropped 1.8 percent, Germany’s DAX Index (DAX) declined 2.3 percent and the U.K.’s FTSE 100 Index slid 1.5 percent. Spain’s IBEX 35 Index and Italy’s FTSE MIB Index lost 0.1 percent. Both gauges jumped more than 4 percent earlier today.
“The downgrade is just one factor in a very broad issue -- this is becoming a synchronized global growth slowdown,” said Ian Harnett, heard of European strategy at Absolute Strategy Research Ltd. on Bloomberg Television. “Markets on both sides of the Atlantic are discounting not only a recession, but actually a very aggressive recession.”
BHP Billiton Retreats
BHP Billiton Ltd. (BHP), the world’s largest mining company, plunged 4.3 percent to 1,861 pence as commodities extended their biggest weekly drop in three months amid concern that the economic slowdown may erode demand. Anglo American Plc lost 4.8 percent to 2,400.5 pence and Rio Tinto Group sank 5.9 percent to 3,410 pence.
Separately, Rio Tinto and Mitsubishi Corp. offered A$1.49 billion ($1.54 billion) for the shares in Coal & Allied Industries Ltd. they don’t own to take the coal miner private.
PSA Peugeot Citroen, which was today downgraded by Morgan Stanley to “underweight,” led carmakers lower, tumbling 8.3 percent to 20.55 euros. Daimler AG (DAI) sank 5.5 percent to 39.67 euros and Volkswagen AG (VOW) retreated 5.8 percent to 109.15 euros.
Among technology companies, Alcatel-Lucent SA plunged 8.2 percent to 2.26 euros, Infineon Technologies AG (IFX) lost 7 percent to 5.53 euros and ARM Holdings Plc (ARM) decreased 6.9 percent to 471.2 pence.
Spanish Lenders
Spanish and Italian banks advanced after the ECB was said to buy Spanish and Italian government bonds this morning.
In a statement after an emergency Governing Council conference call last night, the ECB said it will “actively implement” its bond-purchase program. The bank also called on all euro-area governments to follow through on the steps they agreed to on July 21, including allowing the European Financial Stability Facility to purchase bonds on the secondary market.
Santander, Spain’s largest lender, gained 1.5 percent to 6.54 euros and Banco Bilbao Vizcaya Argentaria SA (BBVA) climbed 1.6 percent to 6.60 euros in Madrid trading. In Milan, UniCredit SpA (UCG), Italy’s largest bank, rose 1.9 percent to 1.08 euros and Intesa Sanpaolo SpA gained 2.4 percent to 1.33 euros.
France’s Societe Generale (GLE) SA sank 3.5 percent to 26.48 euros in Paris. The nation’s second-biggest bank and UniCredit denied a report in the Mail on Sunday that the lenders may required a bailout.
No comments:
Post a Comment