European markets end lower as euro gains ground
Europe’s main stock markets finished lower yesterday, with investors concerned about the risk of the violence destabilising Libya spreading throughout the oil-rich region, while the euro rose.
London’s FTSE 100 index of leading shares closed down 0.97 per cent at 5,935.76 points, after breaching the 6,000 point mark earlier in the day.
In Paris, the CAC 40 lost 1.05 per cent to 4,067.15 points while in Frankfurt the DAX finished 0.68 per cent lower at 7,223.3 points.
Some of those falls came as Fitch Ratings agency cut Libya’s credit ratings three notches to a below investment grade rating of BB, due to the political and economic turmoil rocking the oil-producing nation.
“The downgrades reflect Fitch’s view that the increasingly chaotic political and economic conditions in Libya are no longer consistent with an investment grade rating,” Charles Seville, director in Fitch’s Sovereign Ratings Group, said in a statement.
Catherine Hunter of IHS Global Insight warned that the lack of certainty over who was in charge of the opposition-held areas meant it was impossible to reliably predict the near-term performance of the oil fields.
“The risk remains that the lack of alternative institutions outside the Gaddafi regime will lead to a prolonged breakdown in authority, while decision-making structures are rebuilt and political settlements sought, perhaps complicated by control of strategic infrastructure such as oil,” she said.
Elsewhere the Milan bourse was down 1.07 per cent while Madrid shed 0.82 per cent and Amsterdam 0.32 per cent.
The Lisbon market was marginally down by 0.09 per cent.
Bucking the European trend, though with no great movement, were the Brussels bourse which gained 0.21 per cent and its Swiss counterpart up 0.13 per cent.
The euro finished marginally higher against the dollar, standing at $1.3810 in late trading, after finishing at 1.3803 on Monday. Those exchange figures hid the fact that the euro lost most of the gains it had made earlier in the day.
Eurozone inflation rose to 2.4 per cent year-on-year in February from 2.3 per cent in January, according to official EU estimates yesterday.
That rate was above the European Central Bank’s medium-term inflation target of slightly below two per cent across the 17-nation bloc.
Rising inflation has fanned speculation that the ECB could advance a rate hike that many currently expect early in the third quarter of this year.
Comments by US Federal Reserve chairman Ben Bernanke to Congress about rising commodity prices stopped an early rise in US stocks in its tracks, and pulled many of the European exchanges down as well. At 1730 GMT the Dow Jones Industrial Average was 0.68 per cent down at 12,142.67 points and the tech-rich Nasdaq shed 1.01 per cent to 2,754.30.
The broad-market S&P 500 index fell 0.03 per cent to 1,316.25.
Wall Street “started to slide back after the Fed chairman admitted that recent rises in commodity prices could well translate into significant increases in headline inflation, and impact growth further down the line, though he said that they weren’t a problem at the moment,” said Michael Hewson, market analyst at CMC Markets.
In Asian trade earlier Tuesday, markets were also higher with Tokyo performing strongly after a rally on Wall Street and as oil prices stabilised.