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Europe stocks fall to near two-month low

Last Updated: Wednesday, April 11, 2012 - 23:56

London: European stocks slumped to near two-month lows, Wednesday as investors fretted that recent downbeat economic data out of China and the US might suggest a slowdown in the pace of the global economic recovery.

The benchmark Stoxx 600 index fell to an intraday low of 255.19, its lowest level since Feb. 16. Investors were reacting to disappointing US nonfarm payrolls released Friday, which increased by 120,000 in March, snapping a three-month streak of 200,000-plus jobs growth.

Economists surveyed by Dow Jones Newswires had expected, on average, an increase of 203,000.
Tuesday was the first opportunity for European equity markets to react to the US data, having been closed since Friday for the Easter break.

At 0820 GMT, the Stoxx 600 index was 1.0 percent lower at 256.38. London's FTSE 100 was down 0.9 percent at 5674.14, having fallen to an intraday low of 5651.31, its lowest point since mid-January.

Elsewhere, Frankfurt's DAX slumped 0.9 percent to 6715.80 and Paris's CAC-40 declined 1.3 percent to 3278.30.

Adding to the debate on a slowing global economy, Chinese economic data also disappointed Tuesday.

China posted a trade surplus of USD 5.35 billion in March, reversing a USD 31.48 billion deficit in February due to much weaker-than-expected imports. Imports grew 5.3 percent in March. "These data will likely revive discussion of a potential hard landing," said Ian Williams, an analyst and economist at Peel Hunt.

In addition, concerns regarding the European "periphery" persist. The Spanish government reiterated Monday its goal of lowering the budget deficit to 3 percent of gross domestic product in 2013 and said it will speed up the sale of nationalized banks. Madrid's IBEX 35 was down 1.3 percent at 7556.80 and Spain's 10-year bond yield hit 5.84 percent, the highest level of the year.

"The increase in Spanish and Italian yields should help to impress on politicians that they cannot step back from their commitments if they wish to be able to borrow money at less onerous rates," said Dan Morris, a global strategist at JPMorgan Asset Management.

As a result of the downbeat sentiment, banks unsurprisingly led the declines in Europe. At 0825 GMT, the Stoxx 600 banks index was down 1.5 percent. UniCredit was down 3.1 percent and Intesa Sanpaolo was off 3.2 percent.

Randgold Resources, on the other hand, stormed ahead and was leading the FTSE 100 gainers. The stock soared 10.2 percent after Mali's military junta agreed to reinstate the country's constitution following last month's coup. The company, which has significant operations in Mali, said it has largely been unaffected by the political upheaval.

Earlier, Asian stock markets finished mostly lower, with resources stocks underperforming on several bourses as investors reassessed the global growth outlook following the recent downbeat economic data out of the US and China.

Japan's Nikkei Stock Average fell 0.1 percent, Australia's S&P/ASX 200 was off 0.6 percent and South Korea's Kospi Composite lost 0.1 percent. Hong Kong's Hang Seng Index fell 1.2 percent and China's Shanghai Composite climbed 0.9 percent.

In foreign exchange markets, the euro was lower versus the dollar. At 0820 GMT, the euro was at USD 1.3085 against the dollar, from USD 1.3105 late Monday in New York.

May Nymex crude oil futures were down USD 0.15 at USD 102.31 per barrel and Brent crude oil futures were USD 0.55 lower at USD 122.12. Spot gold was at USD 1,646.20 per troy ounce, up USD 0.10 from its New York settlement Monday.

There are no European economic data of note slated for release Tuesday. Out of the US, monthly wholesale trade inventories and the IBT/TIPP economic optimism index are both at 1400 GMT.

Bureau Report

First Published: Wednesday, April 11, 2012 - 13:41
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