European shares slump, oil prices slide

Europe’s main stock markets slumped yesterday in a poor start to the week as investors reacted to news of sliding business confidence in eurozone economic engine Germany, dealers said.

European financial markets dropped on fears about faltering global growth

London’s FTSE 100 index of top companies ended the day off 0.24 per cent at 5,838.84 points, while in Frankfurt, the Dax 30 gave up 0.54 per cent to finish at 7,413.16 points.

In Paris the CAC 40 fell by 0.94 per cent to 3,497.22 points, Madrid’s IBEX 35 lost 1.12 per cent to 8,138.40 points, and Milan’s FTSE Mib closed 0.78 per cent lower at 15,867 points.

In foreign exchange trade, the euro eased to $1.2910 from $1.2985 in New York late on Friday. Gold prices fell to $1,761.60 an ounce on the London Bullion Market, down from $1,784.50.

Meanwhile, oil prices slumped yesterday, mirroring the pattern seen across stock markets and on concerns over a weak demand outlook for crude, traders said.

Brent North Sea crude for delivery in November dropped $2.12 to $109.30 a barrel in late London deals and after a brief rebound at the end of last week.

New York’s benchmark contract, West Texas Intermediate crude for November, shed $1.59 to $91.30 a barrel.

“European financial markets dropped on fears about faltering global growth, highlighted by a weaker than expected German Ifo survey that reminded investors that the euro area’s strongest and largest economies are feeling the heat of the debt crisis,” said ETX Capital trader Ishaq Siddiqi.

“The data also raised fears that Germany could enter a recession by early next year, pressuring the euro currency against the dollar.

“On top of that, the uncertain situation in Spain rattles nerves with the country expected to present a new structural reform programme at the end of this week and announce results of its bank stress tests.”

German business confidence fell for the fifth month in a row this month to the lowest level since February 2010, data showed yesterday, suggesting that the eurozone debt crisis was increasingly hurting the German economy.

The Ifo economic institute’s closely watched business climate index dropped to 101.4 points in September from 102.3 points in August.

“Clearly, Europe is moving deeper into recession,” Fred Dickson at DA Davidson & Co. said in a client note.

“This presents a big problem for European countries with financial problems (Spain, Italy) but also weakens the case for stronger European countries to kick in huge amounts of funds into the various EU financial rescue plans.”

Markets were already spooked after the leaders of Germany and France clashed on Saturday over plans to monitor Europe’s crisis-hit banks.

“That poor Ifo has not helped sentiment that was already pretty negative on the weekend disagreements between (German Chancellor Angela) Merkel and (French President François) Hollande over the timetable for banking union,” said Michael Hewson, analyst at CMC Markets trading group.

At the weekend, Merkel and Hollande differed over a key plank of crisis-fighting: tighter checks on the European banking sector.

“I support a banking union, it is an important measure and we must proceed step-by-step,” Hollande told reporters following a meeting in Germany, while stressing that such a framework should be in place “the earlier the better.”

Merkel, for her part, said Berlin also backed European oversight of lenders but urged a more cautious approach, saying haste could prove costly.

While France would like to hand the European Central Bank power to supervise all 6,000 eurozone banks from January, Germany would like it to keep an eye just on big banks and is in little hurry.

Asian stock markets mostly closed lower on Monday as the recent rally fuelled by central banks’ stimulus plans petered out, while there were fears over Greece’s ability to meet requirements to get more bailout cash.