Monday, January 30, 2012

why european stock markets down 1-30 2012

why european stock markets down 1-30 2012 ; European stock markets fell Monday, led by financials and resource stocks as a lack of progress over Greece and soaring bond yields in Portugal gave investors reason to back away from stocks, while fresh U.S. data also weighed.

Extending earlier losses, the Stoxx 600 index fell 1.6% to 252.44, extending a 1% loss from Friday. The FTSE 100 index fell 1.5% to 5661.60. Frankfurt's DAX was 1.16% lower at 6436.24 and Paris's CAC-40 was down 1.29% at 3276.00.

Europe stocks pushed deeper into negative territory after a report showed that U.S. consumers spent less and saved more. Wall Street stocks opened lower.

Investors were also cautious as a European Union leader's summit was getting under way in Brussels to endorse a permanent bailout fund with a lending capacity of €500 billion ($661 billion) and to finish details of a fiscal pact aiming at budget deficits. But investors were also hopeful that Greece would be on the agenda.

"There's a realization in the market that it's all that's coming out of today's meeting. Things in Greece haven't progressed enough to be included today," said Victoria Cadman, economist at Investec Securities.

Italy sold a total of €7.475 billion ($9.88 billion) of Treasury bonds Monday, compared with a target of €8 billion. "All in all, demand was not too bad but some caution seems to have prevailed, given the recent tightening of Italian spreads and recent downgrade by Fitch, which was expected but still not much welcomed," said Newedge.

In terms of data, the Economic Sentiment Indicator for the euro zone came in at 93.4 in January, a slight uptick from 92.8 in December, but still below expectations for a reading of 93.6. "Today's figures seem to indicate that the euro-zone recession is bottoming out, although it would definitely be too soon to declare the recession over," said ING. "Therefore, the level of uncertainty remains too high."

In London, the banking sector was in the spotlight, with Royal Bank of Scotland slipping 2.1%. Chief Executive Stephen Hester has decided to waive his bonus of around £963,000 (around $1.5 million) for 2011 after much political and public pressure. Shore Capital analyst Gary Greenwood said: "Mr. Hester and his team have done an excellent job in driving the bank towards stability during the past 12 months and the ongoing politicization of contractually owed bonuses can only serve to increase the risk that management will ultimately decide to leave, severely hampering the prospects of a further recovery."

Banks overall weren't having a pleasant session. The Stoxx Europe 600 banks index was down 2.4%.

Late Friday ratings agency Fitch downgraded Italy, Spain, Belgium, Slovenia and Cyprus, and cut its outlook on Ireland, citing concerns about further monetary shocks in the euro zone and the divergence of monetary and credit conditions in the region. Also, BofA-Merrill Lynch downgraded both BNP Paribas and Société Générale on recent stock price performance and proposals by Francois Hollande, the opposition Socialist presidential candidate, to rein in French banks by raising taxes and separating commercial from investment banking. Société Générale was down 6.3% and BNP Paribas was 6.0% lower. For the latest updates on the stock market, visit Stock Market Today
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