Europe’s leading stock markets retreated yesterday as eurozone debt fears sparked by a credit downgrade to Spain overshadowed news of positive company earnings, traders said.
London’s FTSE 100 index of leading shares dropped 1.55 per cent to 5,845.29 points, while in Paris, the CAC 40 slid 0.75 per cent to 3,963.99 points and in Frankfurt the DAX fell 0.96 per cent to 7,063.09 points.
“Markets are taking another pasting ... mainly on the back of Spain getting downgraded by Moody’s,” said Spreadex trader Chris Purdy. “Market focus has now swung from panic over high oil prices derailing the world economy ... to European debt. It is quiet bizarre how the market chooses to ignore these debt problems and then become spooked when they resurface.
“They have not gone away and if anything will become worse, as we are seeing,”Mr Purdy added.
Moody’s sliced Spain’s credit rating yesterday and warned it might do so again, as it raised the alarm over Spanish banking woes and spendthrift regions.
New York-based Moody’s cut the long-term debt rating by a notch to “Aa2” with a negative outlook, a serious setback to Spain’s efforts to quell fears it may need an international financial rescue.
The downgrade came on the eve of a eurozone summit in Brussels to discuss bolstering the euro’s defences against speculation that weak economies such as Portugal may follow Ireland and Greece into crisis.
The Madrid stock market’s IBEX-35 index ended the day down 1.17 per cent at 10,435.6 points.
Elsewhere in Europe, Lisbon lost 0.33 per cent, Brussels shed 0.35 percent, Swiss stocks slid 0.65 per cent and Milan fell 1.59 per cent.
In company news, the world’s leading luxury carmaker BMW reported record profits and sales for 2010 yesterday and said it expected more of the same this year.
The group, which also owns the Mini and Rolls-Royce car brands, said net profit soared to 3.23 billion ($4.45 billion) from 210 million in 2009. BMW’s share price initially rose but ended the day down 1.75 per cent at 57.12 in Frankfurt.
US shares fell sharply as markets opened on a spate of negative news including poor US trade data.
At 1700 GMT the Dow Jones Industrial Average had lost 1.32 per cent at 12,051.44 points, while the broader S&P 500 was down 1.40 per cent to 1,301.52 points.
The tech-heavy Nasdaq Composite lost 1.48 per cent to 2,711.03 points. The unexpectedly large increase in the US trade deficit and China turning in its own rare trade shortfall in February helped send a range of stocks tumbling, especially those linked to primary commodities, capital goods and energy.
Stock markets plunged in Asia as oil prices rose following intensified fighting in Libya that left a string of oil facilities ablaze, and as China announced a trade deficit for February.