Most major European stock markets fell again yesterday in the wake of sharp losses a day earlier after US data undermined sentiment already shaken by worries over a possible Spanish bailout.
London’s benchmark FTSE 100 index slipped by 0.18 per cent to 5,306.95 points and Frankfurt’s DAX 30 was off by 0.26 per cent at 6,264.38 while in Paris the CAC 40 added a slight 0.05 per cent to 3,017.01 points.
The CAC was down by six per cent for the month of May as a whole, however.
In foreign exchange trading, the euro dropped to a 23-month low of $1.2358 from $1.2366 late in New York on Wednesday.
The single European currency also briefly fell below 97 yen in New York, the lowest level for that pair in more than 11 years.
Analyst Brenda Kelly at CMC Markets said: “hopes that Spain will manage without a bailout (are) all but fizzling out.” In New York, US stocks also slid in midday trading as jobs and growth data painted a dull picture of momentum in the world’s biggest economy.
The Dow Jones Industrial Average was down 0.43 per cent at 12,366.13 points.
The S&P 500 index, a broad measure of the markets, lost 0.71 per cent to 1,304, while the tech-rich Nasdaq slipped 0.85 per cent to 2,813.35
US officials cut their estimate for first-quarter economic growth to 1.9 per cent from 2.2 per cent, confirming the sluggish pace and raising questions over how much of a rebound could be expected in the current quarter.
Two US jobs reports – weekly unemployment claims and private-sector job creation in May – both disappointed, pointing to slow overall growth over the past month.
“Unfortunately, sentiment appears to be falling by the day,” Alpari analyst Craig Erlam commented.
On secondary bond markets, the interest rate earned by holders of French 10-year government bonds fell to a record low yesterday in a sign that investors saw France as a safe haven from economic troubles in Spain.
The yield on French 10-year debt sank to 2.322 per cent, breaking a previous record set on May 25, though it later edged higher to 2.350 per cent. The rate on benchmark 10-year German bonds hit a new record low of 1.197 per cent before rebounding slightly to 1.210 per cent.
Official data published yesterday showed headline unemployment in Germany had declined further in May, shrugging off the eurozone debt crisis, although there were signs that the downward trend was slowing.
The German jobless rate, which measures the proportion of people registered as unemployed against the working population as a whole, fell to 6.7 per cent in May from seven per cent in April.
Separate data showed retail sales in Germany rose for the second month in a row in April, beating analysts’ expectations.
Eurozone inflation was coming down at a quicker pace meanwhile, the EU said with a first estimate for May showing annual price rises easing to 2.4 per cent.
But “Europe clearly needs a road map how to get out of the troubles” it has struggled with for more than two years now, said Gekko Global Markets trader Anita Paluch.
“Spain remains at the heart of concerns,” she noted.
Spreadex trader David White stressed that “markets are particularly vulnerable to any US economic softening, which would likely compound investors’ anxiety to hold risk already present courtesy of Europe.”