European stocks slide on weak data, Portugal bank woes

GMT 14:01 2014 Thursday ,10 July

Arab Today, arab today European stocks slide on weak data, Portugal bank woes

An employee at a factory in Thoissey
London - AFP

European stock markets dived Thursday on the back of weak industrial output data and a growing crisis engulfing Portuguese lender Banco Espirito Santo.
Sentiment was also weighed down as Chinese exports fell short of expectations.
In early afternoon deals, London's FTSE 100 dropped 0.85 percent to 6,660.88 points, after the Bank of England held interest rates as expected at a record-low 0.50 percent.
Frankfurt's DAX 30 slid 1.52 percent to 9,658.87 points, the Paris CAC 40 slid 1.54 percent to 4,292.93, and Milan's FTSE Mib was down 2.14 percent at 20,442.71 points.
Across in Portugal, Lisbon's PSI 20 benchmark tumbled 4.34 percent to 6,092.66 points, while Madrid's Ibex 35 index fell 2.48 percent to 10,482.20.
Portugal was rocked Thursday by the crisis surrounding lender Banco Espirito Santo, in news which also sent the nation's bond yields higher.
- Bank sector slides -
"It looks like it is mainly concerns about the health of Banco Espirito Santo that has dented market sentiment with bank shares losing ground across the board," said analyst Fawad Razaqzada.
"With BES being the largest Portuguese bank, the market is refusing to ignore its potential impact on Portugal and other peripheries."
Earlier, Espirito Santo Financial Group (ESFG) the largest shareholder of BES, announced it would suspend trading of its stocks and bonds.
ESFG said in a statement it is "assessing the financial impact of its exposure to" Espirito Santo International (ESI), which is being investigated by Luxembourg authorities over allegations its covered up a hole in its accounts.
Earlier in the day, the financial news agency Bloomberg quoted BES as announcing delays in payments of short term debt by its parent holding company.
"No doubt BES is making the main headlines today and is widely blamed for the hefty fall in Portuguese shares and some other periphery countries like Italy and Spain," said analyst Markus Huber, at brokerage Peregrine & Falcon.
"However, there is nothing at this stage that would be indicating that the material irregularities which were found at ESI are extending to the entire Portuguese banking system."
In reaction to Thursday's newsflow, shares in BES collapsed 11.54 percent to just 0.54 euros.
France and Italy meanwhile became the latest of Europe's biggest economies to post poor output data.
"What really hurts shares today ... are worries that the economic recovery in the eurozone might be already weakening again," Huber told AFP.
"Latest economic data out of Germany and also today from France and Italy are clearly seeming certainly to point this way."
French industrial production fell 1.7 percent in May after posting slight growth the month before, official data showed.
And Italy's industrial production dropped unexpectedly by 1.2 percent in May from April, in the biggest slump since November 2012, separate data showed.
Germany and Britain have already issued disappointing figures for May, raising fears that Europe's economic recovery may be stalling.
In commodity deals on Thursday, haven investment gold soared to a near four-month high at $1,344.90 per ounce -- a level last seen on March 17.
London investors meanwhile digested the BoE's latest decision to maintain rates at 0.50 percent, where they have stood since March 2009.
Britain's central bank added in a brief statement that it also opted to maintain the level of cash stimulus in the economy at £375 billion ($641 billion, 471 billion euros). Both decisions were in line with market expectations.
In foreign exchange activity, the British pound eased to $1.7120 from $1.7159 the day before.
The pound had jumped last Friday to a six-year high of $1.7180 in expectations that London could raise rates in the coming months.
The European single currency eased to $1.3632 from $1.3642 late on Wednesday in New York. The euro also rose to 79.66 pence from 79.50 pence.
- Asian equities mostly climb -
Asian stocks were mainly higher Thursday after Wall Street advanced in response to an upbeat outlook for the US economy by the Federal Reserve.
An indication from the Fed that it will keep interest rates at record lows well into next year kept downward pressure on the dollar.
Sydney added 0.22 percent despite soft jobs figures, while Seoul added 0.12 percent, Hong Kong put on 0.27 percent and Shanghai was flat.
Tokyo dipped 0.56 percent as the strong yen weighed on exporters.

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