Banking woes drag European shares to lower close
European shares closed lower yesterday, with some banks down on worries over their exposure to Dubai World and Greek banks hit by a Fitch Ratings downgrade on Greece's credit rating.
The pan-European FTSEurofirst 300 index of top shares closed down 1.6 percent at 1,004.41 points and hit a one-week low of 999.71.
The index is up 56 per cent since reaching a record low in early March and is up about 21 per cent for the year.
Across Europe, the FTSE 100 index was down 1.7 per cent, Germany's DAX was 1.7 per cent lower and France's CAC 40 was down 1.4 per cent.
"Investors have been reminded there are many issues out there - the Dubai World and the Greek downgrades - it suggests there are still many potential nasties out there," said Peter Dixon, economist at Commerzbank. "The old buyer beware phrase is very much at the forefront of our minds at the moment ... Though my initial reaction is the Greek development has given the market a bit of a shove down."
Banks took the most points off the index. Fitch Ratings cut Greece's debt to BBB+ with a negative outlook, the first time in 10 years a major ratings agency has put Greece below an A grade.
National Bank of Greece and EFG Eurobank were 10 and 6.5 per cent lower.
The sector was also hit after traders cited a report about the size of losses facing Nakheel, a unit of Dubai World. HSBC, Barclays, Banco Santander and BNP Paribas were down 1.6 to 3.2 per cent.
Energy stocks slipped as crude fell 1.5 per cent. BG Group, BP, Royal Dutch Shell and Total were down 1.1 to two per cent.
Miners were under pressure as metal prices retreated. Anglo American, Antofagasta, BHP Billiton, Eurasian Natural Resources Corporation, Rio Tinto and Xstrata were 1.7 to 3.5 per cent lower.
Tesco fell 2.3 per cent after it posted quarterly sales growth towards the bottom end of forecasts, held back by a drop in food price inflation, but said a gradual consumer recovery remained on track.
Also weighing on investor sentiment was news that German industrial output unexpectedly fell in October, pointing to a slowdown in the economy's recovery in the final quarter of this year.