Euro stocks fall on banks
LONDON: European stock markets closed sharply lower yesterday with losses of more than 2% in London and Paris on fresh concerns over the fallout from the US subprime home loan crisis on the banks.
Dealers said news of further heavy losses in Fannie Mae and Freddie Mac – key US mortgage providers – unsettled investors after the two were largely responsible for a two% tumble on Wall Street on Wednesday.
Nervous investors found no relief in US Treasury Secretary Henry Paulson’s reassurances yesterday that the two groups were “adequately capitalised” in the face of a “challenging period.”
The heavy losses were “largely attributable to fears that the already embattled US mortgage issuer market was showing even greater cracks as the housing market continues to deteriorate,” commented strategists at Deutsche Bank, quoted by Dow Jones Newswires.
In London, the FTSE 100 index fell 2.22% to 5,406.80 points, in Paris the CAC 40 lost 2.49% to 4,231.56 points and in Frankfurt, the DAX was down 1.28% at 6,305points.
The Euro Stoxx 50 index of leading eurozone companies fell 1.78 %. The euro was at $1.5771.
Paulson’s comments before Congress came amid growing market fears and speculation that the two government chartered, shareholder-owned finance firms with trillions of dollars in their portfolios could be in trouble. Freddie Mac shares plunged 28% to $7.31 yesterday to take its losses to more than 77% from its most recent peak in January. Fannie Mae sank 16.6% to $12.76, down 66% so far this year.
On Wall Street, there was some early support after Dow Chemical announced it was buying a rival firm for over 18bn dollars and as retail giant Wal-Mart unveiled a robust sales report.
The blue-chip Dow Jones Industrial Average was up 0.50% at around 1615 GMT.
In London, the banks took the brunt of the losses.
Barclays fell 3.07% to 284.25 pence, Royal Bank of Scotland was down 1.41% to 199.90 pence and Lloyds TSB tumbled 4.02% to 292.50 pence.
Elsewhere in Europe, the Bel-20 in Brussels was down 2.08 %, the Ibex-35 in Madrid lost 2.17%, Italy’s Mib-30 index fell 1.44%, the AEX 25 in Amsterdam shed 2.17% and the Swiss Market Index was off 1.71%. – AFP
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