GLOBAL MARKETS: European Stocks Slump As Libor Rises Again
LONDON (Dow Jones)--European stock markets slumped Tuesday, hit by higher inter-bank lending rates, concerns about the banking industry following the weekend rescue of Spanish regional savings bank CajaSur and worries about the growing tensions between North and South Korea.
Meanwhile, the euro, core European bond yields and oil prices all tumbled, while stock-index futures suggested further sharp losses on Wall Street Tuesday. The three-month U.S. dollar London interbank offered rate rose to 0.53625% from 0.50969% Monday, its highest level since July 2009.
"With the euro under pressure, Libor pushing higher and geopolitical tensions raised, investors have few reasons to try and call a bottom to this," said David Morrison at GFT. "For now, it's all about deleveraging and unwinding anything even remotely risky, and equities are top of the list," he added.
By 1125 GMT, the Stoxx Europe 600 index was down 2.8% at 231.28. London's FTSE 100 index was down 2.7% at 4932.02, Frankfurt's DAX index was 2.8% lower at 5641.18, and Paris's CAC-40 index was down 3.5% at 3310.95.
Meanwhile, U.S. stock futures indicated a significantly weaker open on Wall Street. The June Dow Jones Industrial Average futures contract was down 2.1% at 9829, and the June S&P 500 futures contract was 2.5% lower at 1043.9.
In the U.K., the FTSE 100 traded well below the psychologically important 5000 level. "We've seen a number of major indices crash through significant support levels, leaving many traders a bit shell-shocked," said Morrison.
The mounting concerns about the state of the euro currency and the global economy have pinned down stock prices, said J Wong, analyst with Investors Intelligence. "Expecting a minor bounce in equities [this week], all we got was silence from the bulls. Without the participation of the bulls, the downside risk remains large, even though the downtrend is short-term oversold," he said.
Financial stocks bore the brunt of Tuesday's selloff in Europe, with the markets' focus on Spain, as a plan to consolidate the Spanish savings-bank sector has been submitted to the Spanish government by five institutions which could together form Spain's fifth largest financial institution.
This follows the Bank of Spain's rescue of Spanish regional savings bank CajaSur. The consolidation of the five Spanish institutions may contribute to supporting the banking sector in the medium term, but in the short term it keeps the focus on financial frugalities, said Credit Agricole Corporate & Investment Bank.
Shares in Spain's Banco Santander fell 6.5%, while peer Banco Bilbao Vizcaya Argentaria was off 6.7%. Elsewhere, ING Groep lost 7.9% and Societe Generale fell 7.3%. The pan-European Stoxx 600 banks index was 4.7% lower at 184.09.
Adding to the downbeat tone, Larry Summers, the director of the U.S. Council of Economic Advisers, and one of the U.S. President's closest economic advisers, said the sovereign-debt crisis in southern Europe could lead to 'increased budget deficits' and 'dire consequences for financial markets.'
Rising Libor provided another reason to sell stocks and buy bonds. "Negative sentiment continues to dominate global equity markets given the ongoing European sovereign-debt crisis and higher Libor rates both driving funding rates higher, said Danske Bank.
Meanwhile, political tensions on the Korean peninsula weakened market sentiment further after North Korea sank a South Korean warship. "If concerns that European credit markets were beginning to freeze wasn't enough, we've now got a serious situation developing on the Korean peninsula, with rumors suggesting North Korea has mobilized its forces ready for war," said Ben Potter, analyst at IG Markets.
In the U.K., markets largely shrugged off the release of revised first-quarter gross domestic product data, which were in line with expectations, as all eyes remained firmly on the euro zone. Data showed the economy expanded an upwardly revised 0.3% in the first quarter, as the manufacturing sector gathered momentum, but the modest gain underscores the continuing fragility of economic recovery.
Still to come on the economic calendar, the S&P/Case Shiller house-price index and consumer-confidence figures are due in the U.S. at 1300 GMT and 1400 GMT, respectively.
Meanwhile, the euro, core European bond yields and oil prices all tumbled, while stock-index futures suggested further sharp losses on Wall Street Tuesday. The three-month U.S. dollar London interbank offered rate rose to 0.53625% from 0.50969% Monday, its highest level since July 2009.
"With the euro under pressure, Libor pushing higher and geopolitical tensions raised, investors have few reasons to try and call a bottom to this," said David Morrison at GFT. "For now, it's all about deleveraging and unwinding anything even remotely risky, and equities are top of the list," he added.
By 1125 GMT, the Stoxx Europe 600 index was down 2.8% at 231.28. London's FTSE 100 index was down 2.7% at 4932.02, Frankfurt's DAX index was 2.8% lower at 5641.18, and Paris's CAC-40 index was down 3.5% at 3310.95.
Meanwhile, U.S. stock futures indicated a significantly weaker open on Wall Street. The June Dow Jones Industrial Average futures contract was down 2.1% at 9829, and the June S&P 500 futures contract was 2.5% lower at 1043.9.
In the U.K., the FTSE 100 traded well below the psychologically important 5000 level. "We've seen a number of major indices crash through significant support levels, leaving many traders a bit shell-shocked," said Morrison.
The mounting concerns about the state of the euro currency and the global economy have pinned down stock prices, said J Wong, analyst with Investors Intelligence. "Expecting a minor bounce in equities [this week], all we got was silence from the bulls. Without the participation of the bulls, the downside risk remains large, even though the downtrend is short-term oversold," he said.
Financial stocks bore the brunt of Tuesday's selloff in Europe, with the markets' focus on Spain, as a plan to consolidate the Spanish savings-bank sector has been submitted to the Spanish government by five institutions which could together form Spain's fifth largest financial institution.
This follows the Bank of Spain's rescue of Spanish regional savings bank CajaSur. The consolidation of the five Spanish institutions may contribute to supporting the banking sector in the medium term, but in the short term it keeps the focus on financial frugalities, said Credit Agricole Corporate & Investment Bank.
Shares in Spain's Banco Santander fell 6.5%, while peer Banco Bilbao Vizcaya Argentaria was off 6.7%. Elsewhere, ING Groep lost 7.9% and Societe Generale fell 7.3%. The pan-European Stoxx 600 banks index was 4.7% lower at 184.09.
Adding to the downbeat tone, Larry Summers, the director of the U.S. Council of Economic Advisers, and one of the U.S. President's closest economic advisers, said the sovereign-debt crisis in southern Europe could lead to 'increased budget deficits' and 'dire consequences for financial markets.'
Rising Libor provided another reason to sell stocks and buy bonds. "Negative sentiment continues to dominate global equity markets given the ongoing European sovereign-debt crisis and higher Libor rates both driving funding rates higher, said Danske Bank.
Meanwhile, political tensions on the Korean peninsula weakened market sentiment further after North Korea sank a South Korean warship. "If concerns that European credit markets were beginning to freeze wasn't enough, we've now got a serious situation developing on the Korean peninsula, with rumors suggesting North Korea has mobilized its forces ready for war," said Ben Potter, analyst at IG Markets.
In the U.K., markets largely shrugged off the release of revised first-quarter gross domestic product data, which were in line with expectations, as all eyes remained firmly on the euro zone. Data showed the economy expanded an upwardly revised 0.3% in the first quarter, as the manufacturing sector gathered momentum, but the modest gain underscores the continuing fragility of economic recovery.
Still to come on the economic calendar, the S&P/Case Shiller house-price index and consumer-confidence figures are due in the U.S. at 1300 GMT and 1400 GMT, respectively.
bonurasa - 25. Mai, 14:08
