European stock markets fell yesterday amid more bad news for indebted Spain and poor US economic data.
London’s FTSE 100 index slid 0.68 per cent to close at 5,737.78 points and the Frankfurt DAX 30 was 0.59 per cent lower at 6,761.19 points.
In Paris the CAC 40 dropped by a stiff 1.64 per cent to 3,212.80 points and Madrid’s IBEX 35 index lost 1.89 per cent to 7,011 points as data confirmed that Spain was back in recession and Standard & Poor’s downgraded the top Spanish banks.
In foreign exchange deals, the euro traded for $1.3231 or the same level as late on Friday in New York.
“Once again, the Spanish ulcer is providing cause for concern; anti-austerity protests took place over the weekend and this morning we have had news confirming that Spain slipped back into recession in the first quarter,” said IG Index trader Yusuf Heusen.
“In addition, S&P has downgraded 11 of Spain’s largest banks, mirroring its move last week on the national sovereign debt rating.”
Looking ahead, Mr Heusen noted “a busy week for economic news, with manufacturing data from China, the UK and the US tomorrow, and German unemployment on Wednesday, while the week culminates in (US) non-farm payrolls data that will keep markets on edge from Wednesday onwards.”
Meanwhile, Spain has back tipped into recession, an official estimate confirmed, even as the government pressed ahead with unpopular spending cuts to rein in burgeoning debt. Spain’s economy shrank by 0.3 per cent in the first quarter, the same rate as in the last three months of 2011. A recession is defined as two successive quarters of shrinking economic output.
And S&P downgraded the ratings of the top Spanish banks, including Santander and BBVA, after slashing the country’s credit standing because of worsening deficit and growth problems.
On Friday, S&P slashed Spain’s sovereign rating by two notches to BBB+ and said Monday the same considerations “could have potentially negative implications for our view of the economic risk and industry risk affecting the Spanish banking industry.”
There was better news from Germany, Europe’s biggest economy, which said that retail sales rose 0.8 per cent in March from February, though that did not prevent the stock market from giving up early gains to close with a loss.
Morning trades in New York left the Dow Jones Industrial Average essentially unchanged meanwhile at 13,223.32 points. The S&P 500 index had lost 0.32 per cent to 1,398.82, while the tech-laden Nasdaq fell 0.50 per cent to 3,053.97.
Data on US consumer spending underscored the continued struggle in getting the economy going. Spending growth slowed to 0.3 per cent in March, even as personal income growth picked up.
Asian markets closed higher however. Sydney gained 0.79 per cent, Seoul put on 0.34 per cent and Hong Kong jumped 1.70 per cent. Tokyo and Shanghai were closed for public holidays.