February 20th, 2009
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| Article by:
CHRIS NICHOLSON
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| PARIS — Markets across Europe fell Friday on disappointing corporate news and weak economic data. The slide follows a weak performance for stocks in Asia and difficult day on Wall Street, where the Dow Jones industrial average closed at its lowest in six years.
The Dow Jones Euro Stoxx 50 index, a benchmark for the euro region, was down 3.3 percent by midday, to its lowest level at least five years. The DAX in Frankfurt slid 3.5 percent as investors shed financial and industrial stocks, while the CAC 40 in France was down almost as much and FTSE 100 in London fell 2.75 percent.
In New York, Wall Street seemed poised to extend its losses Friday. Financial shares led the decline Thursday amid concerns about the plans by the Obama administration to help homeowners in foreclosure and shore up the struggling banking system.
Investors will also absorb a new report consumer prices, which is a key measure of inflation and should offer some insight into how the economy is performing.
“We thought the low points of last fall were behind us, but we seem to be in for more disappointments,” said Vincent Juvyns, a strategist at ING Investment in Brussels. “The markets have lost all sense of direction, which makes it hard to take a position.”
Corporate news across the region seemed to confirm fears.
Anglo American, the mining giant, was down nearly 16 percent by midday after announcing it would cut 19,000 jobs, or a tenth of its work force, and suspend dividend payments for 2008 as its business deteriorated on weak global demand.
In France, Compagnie de Saint-Gobain, which supplies construction materials, tumbled 16 percent after announcing it would seek to sell shares to raise 1.5 billion euros, or $1.9 billion, in capital, while confirming yet more job cuts.
And UBS, the Swiss bank, is facing more problems with prosecutors in Washington. A day after the bank agreed to pay $780 million to settle claims that it defrauded the Internal Revenue Service, the federal government went to court seeking the release the names of 52,000 wealthy clients. UBS shares fell more than 16 percent at midday, after rallying almost 5 percent Thursday on news of an initial settlement.
AXA, on of the largest insurers in Europe, was down nearly 14 percent in Paris after Standard & Poor’s downgraded its credit rating, citing uncertain earnings.
The Swedish automaker Saab filed for bankruptcy to seek protection from its creditors after General Motors said it would cut ties with the company after decades of losses.
“We’re at a stage in the economic cycle where we have to prepare for the worst,” Mr. Juvyns said. “Companies are firing to cut costs, since we face a contraction in G.D.P. for the first half of the year.”
Discouraging economic news for the euro zone added to the slide. The purchasing managers’ index, which estimates business activity, showed the downturn accelerating in the first weeks of February in the 16 nations that share the euro. The index is based on a survey of purchasing managers by Markit Economics.
The composite index of activity in services and manufacturing slipped to 36.2 in February, from 38.3 in January, with services hit hardest. Any number below 50 indicates an economic contraction.
In Britain, the Council of Mortgage Lenders reported Friday that 40,000 people had lost their homes in 2008, an increase of 54 percent on a year earlier, and the number is expected to nearly double in 2009 to 75,000.
Asia saw a less dramatic sell-off, led by the Kospi index in South Korea, which fell 3.72 percent dragged down by financial and industrial stocks. In Japan, the Nikkei 225 slipped 1.6 percent, with equities in banks, retail and communications falling furthest. The Hang Seng in Hong Kong dropped 2.49 percent, with financials there also seeing the heaviest losses.
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