European shares fall; focus from Obama to economy
European shares ended lower yesterday after six straight sessions of gains, as commodity shares tracked falling crude and metal prices and the focus shifted back to global economic growth after the US election. FTSEurofirst 300 index of leading...
European shares ended lower yesterday after six straight sessions of gains, as commodity shares tracked falling crude and metal prices and the focus shifted back to global economic growth after the US election.
FTSEurofirst 300 index of leading European shares closed 2.2 per cent lower at 953.24 points. The index has lost nearly 37 per cent so far this year.
Analysts said the new US administration under election winner Barack Obama, which takes office in January, will face the world's worst financial crisis since the Great Depression, and a potentially steep downturn in the global economy.
"Back to the realities of financial world and it seems that the euphoria didn't last that long, with stock markets around the globe peering into what they increasingly believe will be a long and protracted period of global recession," said Howard Wheeldon, senior strategist at BGC Partners.
Commodity stocks were one of the biggest sectoral losers on the index as crude oil prices fell more than seven per cent, while copper, zinc and nickel prices slipped 3.7 to 6 per cent.
BP, Royal Dutch Shell, gas producer BG Group, Cairn Energy and Tullow Oil shed between 1.9 and 4.2 per cent. Banking shares were also lower, with Standard Chartered losing 4.3 per cent, UBS falling two per cent and Commerzbank shedding 3.4 per cent.
"Nothing immediately is going to change as a result of the election victory. We still haven't broken the downtrends," said Darren Winder, head of economics and strategy at Cazenove.
"Sentiment is going to remain quite fragile. Banks continue to be troubled by deteriorating loan quality and prospects of further writedowns," he added.
Political leaders urged US President-elect Obama to help forge a new economic order to lead the world out of its worst financial crisis since the 1930s.
Germany's Cabinet agreed a package of measures to give Europe's biggest economy a €50 billion boost, while Italy will approve a plan to support banks.
Gloomy data from Britain and the 15-nation euro zone added to expectations of hefty interest rate cuts today. British manufacturing output fell for the seventh month running to mark the longest stretch of declines in 28 years. In the euro zone, service sector activity touched a fresh decade low in October.
In the US, the service sector shrank unexpectedly sharply in October, according to a report by the Institute for Supply Management.
A series of European bank results did little to lift gloom around the sector, with a recurring trend of falling profits and rising bad debts stemming from the global financial crisis.
France's biggest bank BNP Paribas fell 1.5 per cent after it posted a 56 per cent fall in third-quarter profits.
Capital rebuilding continued in the face of a tough outlook as Royal Bank of Scotland looked to raise up to £3 billion from a government-backed bond.
The bank's shares were up 5.8 per cent.
ArcelorMittal fell more than 14 per cent after the world's largest steelmaker forecast a weaker final quarter, slashed output and froze growth plans in the face of a global slowdown.
Hannover Re shares slipped 5.5 per cent after the world's fourth-biggest reinsurer said it planned to pay no dividend for 2008 after reporting a €395 million net loss in the third quarter due to writedowns on investments and hurricane damage claims.