European stock markets dropped yesterday with Greece’s debt troubles unsettling the market and the banking and insurance sectors lower in the wake of some disappointing earnings updates.
London’s FTSE 100 index of leading shares slid 0.57 per cent to end the day at 5,942.69 points.
In Paris, the CAC 40 shed 1.25 per cent to 4,007.26 points while in Frankfurt the DAX dropped 1.09 per cent to 7,410.52 points.
Elsewhere in Europe, Brussels dipped 0.28 per cent, Lisbon gave up 0.58 per cent, Swiss stocks slid 0.76 per cent, Amsterdam lost 0.89 per cent, Milan 1.31 dropped per cent and Madrid 2.02 fell per cent.
Standard and Poor’s slashed its rating for Greece, evoking an increasing probability of a debt rescheduling, as sources said the EU is mulling providing more help to the struggling eurozone member.
The Greek downgrade came amid increasing concern that despite its €110 billion bailout by the IMF and EU last year Greece will not be able to keep on top of its massive debt.
S&P cut its long-term rating of Greece by two notches to B, warning that official creditors were increasingly likely to extend the repayment period for Greece and that they would likely want to ensure that private bondholders did likewise.
With European banks big holders of Greek bonds, bank shares were big losers.“After pushing higher in early trading share prices have slid back with banks leading the fallers on the back of uncertainty with respect to the next steps of the sovereign debt saga playing out in Europe,” said Michael Hewson of CMC markets.
The Stoxx 600 index of banking shares was off a sharp 1.60 per cent.
“Also weighing on the markets was a less than enthusiastic reaction to HSBC’s results,” added Mr Hewson.
Shares in HSBC fell 0.54 per cent to 648.2 pence after Europe’s biggest bank unveiled mixed earnings. Britain’s Asia-focused lender said yesterday that net profits surged 58 per cent to more than $4.15 billion (€2.88 billion) in the first quarter on lower taxes and bad debt charges.
However it added that the group’s pre-tax gains were pushed down by rises in other exceptional costs, including money set aside to compensate customers in Britain who were mis-sold payment protection insurance.
Another of Britain’s major banks, Barclays, saw its share price fall 1.31 per cent to 273.95 pence after announcing plans to set aside £1.0 billion (€1.14 billion) to compensate clients who were mis-sold payment protection insurance.
In Frankfurt trade meanwhile, Munich Re shed 1.74 per cent to €110.11 after the world’s biggest reinsurance company unveiled a sharp first quarter loss on major disasters in the Asia Pacific region. It added that the group should still make an annual profit.
Munich Re suffered a net loss of €948 million in the three months from January to the end of March, compared with a profit of €485 billion in the same period a year earlier, a statement said.
US stocks began the week in positive territory. At 1600 GMT the Dow Jones Industrial Average was up 0.04 per cent at 12.644.34 points.
The broader S&P 500 rose 0.14 per cent to 1,342.01 points while the tech-heavy Nasdaq Composite gained 0.08 per cent to 2,829.29 points.
“Favourable data from the equity front is being offset by resurfacing euro-area debt concerns as eurozone officials have agreed that an adjustment to the terms of Greece’s bailout package is needed, and Ireland is reportedly looking for new terms,” said analysts at Charles Schwab.
Japanese shares closed down 0.66 per cent yesterday over concerns about potential power shortages following a government call to shut down the Hamaoka nuclear plant southwest of Tokyo, brokers said.
Sydney climbed 0.29 per cent, Hong Kong finished the day 0.76 per cent higher, and Shanghai gained 0.30 per cent.