European banks push equity markets lower

Early last week European equity markets fell sharply, with financial stocks heading the losses, as concerns over the state of the US subprime mortgage market hit banking stocks.

Fears that some European banks could be exposed to subprime risks have hit the sector in recent sessions, following news of the near collapse of two funds associated with Bear Stearns. Deutsche Bank, which lent money to the funds, fell 1.5 per cent to €107.36. Meanwhile, UBS, the Swiss bank which last month shut down operations at its Dillon Read hedge fund over subprime losses, was down 1.1 per cent to SFr73.95.

The FTSE fell on Wednesday as a disappointing trading update from Northern Rock added to concern about rising interest rates. The mortgage bank slumped 9.6 per cent to 855p as it slashed its profit forecasts, blaming a rise in funding costs following a series of rate rises. The bank said it expected annual profits would grow by 15 per cent, less than the 17 per cent expected by the market.

Japan's Nikkei share average ended its four-day losing streak on Thursday, taking its cue from overnight gains in the US stock market. London equities started to recover in opening trade on Thursday, taking the lead from strength on US and Asian markets overnight, with property stocks dominating the leaderboard on renewed deal hopes.

This article was compiled by Valletta Fund Management Limited, a member of the BOV Group. Valletta Fund Management, The Mall Offices, Level 6, The Mall, Floriana VLT 16. Freephone: 8007-2344. E-mail: infovfm@vfm.com.mt. Website: www.vfm.com.mt. VFM is licensed by the MFSA.