GLOBAL MARKETS: European Stocks Slump; Banks In Focus

 
   By Andrea Tryphonides 
   Of DOW JONES NEWSWIRES 
 

LONDON (Dow Jones)--European stocks slumped Tuesday after a bout of negative news, particularly for financials, dragged the major indexes into the red.

"Stocks appear to have entered into another corrective phase - the fourth since mid-summer," said Bob Doll, chief investment officer at BlackRock.

"The current downturn is likely a reflection of stock prices getting ahead of real improvements in the economy, meaning that the rapid advance in prices that has occurred over the past several months was probably discounting too rosy an economic picture."

By 0855 GMT, the pan-European Stoxx 600 index was down 1.3% at 234.5. London's FTSE 100 fell 1.3% to 5036.4, Frankfurt's DAX was down 1.3% at 5357.3 and Paris's CAC-40 was 1.5% lower at 3586.2.

On a very quiet day for economic news, the European markets were moved by a slew of corporate announcements, with the banks in particular stealing the headlines.

In London, partially state-owned banks Royal Bank of Scotland (RBS.LN) and Lloyds Banking Group (LLOY.LN) announced plans to raise capital to bolster their balance sheets and additionally outlined divestments.

Lloyds rose 3.6% to 88.1 pence after it said it will generate at least GBP21 billion of core capital so that it can avoid participation in the government asset protection scheme.

However, RBS slipped 1.7% to 38 pence. It announced a string of planned divestments and a further capital injection of GBP25.5 billion from the U.K. government. The government's economic stake will rise to 84.4%, but its voting rights will remain at 70.3%.

"The story of the banks is far from over - suggested disposals have now to find buyers prepared to pay acceptable prices to both shareholders and taxpayers, whilst taxpayers still remain substantial owners of banks, a position inconceivable just a few years ago," commented Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers.

Meanwhile, UBS slid 5.2% to CHF16.5 following disappointing third-quarter earnings. The Swiss bank, one of the hardest hit by the financial crisis in Europe, reported a net loss for the third quarter. It swung to a net loss of CHF564 million after a CHF283 million net profit a year ago. Also in the bank sector, Denmark's larges lender Danske Bank declined 4.5% to DKK116.5 after its 3Q net profit dipped on loan losses.

However, Swiss Re increased 6.3% to CHF45.1. It has swung to a third-quarter net profit, thanks to cost-cutting, low catastrophe claims and generally an improvement in the reinsurance market.

Aside from the decline in financials, auto shares also fell. BMW declined 5.9% to EUR31.6 after net profit in the penultimate quarter fell on waning demand for luxury cars.

Earlier, Asian share markets were mixed Tuesday in subdued trade as a holiday in Japan kept the regional bourses range-bound.

Australia's S&P/ASX 200 fell 0.1% and South Korea's Kospi Composite declined 0.6%, while Hong Kong's Hang Seng index fell 1.4%. However, the Shanghai Composite index was up 1.2%.

U.S. stocks ended up overall, although it was a bumpy session during which equities were initially pushed higher by reports on manufacturing, construction spending and pending home sales. But a decline in volatile financials weighed on the market later in the session.

The Dow Jones Industrial Average gained 0.8% to 9789.4, marking only the second time in eight sessions that the Dow hasn't closed with a movement of more than 100 points in either direction. The Standard & Poor's 500 rose 0.6% to 1042.9 while the Nasdaq Composite closed up 0.2% at 2049.2.

Elsewhere, gold prices climbed after the International Monetary Fund said it had sold 200 metric tons of gold to India's central bank. The metal was trading at $1061.10 per troy ounce at 0915 GMT, up $6.70 from the New York close.

The yellow metal and the euro initially gained at the dollar's expense on news of the IMF's move, but the moves were modest and, by 0915 GMT, the euro was weaker on heightened risk aversion, which also boosted the yen. The euro was trading at $1.4738 at 0915 GMT, down from $1.4776 in late New York trading Monday. The dollar was quoted at Y89.98, down from Y90.21.

Crude oil was stable after rising $1.13 in New York on the back of improved economic data. Nymex December crude was last seen down 49 cents at $77.64 per barrel.

European government bonds were stable as investors remained cautious ahead of a busy economic schedule later in the week, with the European Central Bank and the Bank of England announcing their rate decisions on Thursday. At 0915 GMT, December bund futures were up 0.13 at 122.04.

-By Andrea Tryphonides, Dow Jones Newswires; +44-20-7842-9281; andrea.tryphonides@dowjones.com

Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=zzvIlbd1ABWdI3%2FD8hQw4w%3D%3D. You can use this link on the day this article is published and the following day.

(END) Dow Jones Newswires

November 03, 2009 04:22 ET (09:22 GMT)


Copyright 2009 Dow Jones & Company, Inc.

The Dow Jones content is the property of Dow Jones or its licensors, and is protected by copyright and other intellectual property laws. If you are an individual, you agree not to store, copy, reproduce, modify, distribute, transmit, display, perform, publish, transfer, create derivative works from, broadcast or circulate any Dow Jones content to anyone, including but not limited to others in the same company or organization, without the express prior written consent of Dow Jones. If you are an entity, you agree not to permit access to the Dow Jones content by anyone other than an employee of you.

Notwithstanding the foregoing, the Dow Jones content may be copied and sent without charge in the ordinary course of business provided all copyright and other proprietary rights notices, the original source attribution, and the phrase "Used with permission from Dow Jones & Company” are included. Dow Jones content may only be used in this way for a non-commercial purpose, meaning such copying:
(i) is made on either an infrequent or irregular basis to a limited number of individuals;
(ii) is incidental to the purpose of your principal business;
(iii) cannot be used as a substitute for any Dow Jones content or any substantial part of it;
(iv) has no independent commercial value;
(v) is not separately charged for; and
(vi) is not made in connection with commercial information broking, information vending, publishing or credit rating, nor for substantial reproduction through the press or media, nor for transmission via any private or public network, cable or satellite system.

You may not post any Dow Jones content to forums, newsgroups, mail lists, electronic bulletin boards, or other services, without the prior written consent of Dow Jones. To request consent for this and other matters, you may contact Dow Jones at djnewswires@dowjones.com .

The Dow Jones content is not intended for trading purposes. The Dow Jones content is not appropriate for the purposes of making a decision to carry out a transaction or trade. Nor does it provide any form of advice (investment, tax, legal) amounting to investment advice, or make any recommendations regarding particular financial instruments, investments or products. Dow Jones may discontinue or change the Dow Jones content at any time, without notice.

The Dow Jones content includes facts, views, opinions and recommendations of individuals and organizations deemed of interest. Dow Jones does not guarantee or warrant the accuracy, completeness or timeliness of, or otherwise endorse, these views, opinions and recommendations.

DOW JONES IS NOT RESPONSIBLE FOR ANY DELAY IN YOUR RECEIPT OF THE DOW JONES CONTENT RESULTING FROM THE INHERENT LIMITATIONS OF INTERNET TRANSMISSION VIA THE WORLD WIDE WEB. DUE TO THE NUMBER OF SOURCES FROM WHICH THE DOW JONES CONTENT IS OBTAINED, AND THE INHERENT HAZARDS OF ELECTRONIC DISTRIBUTION, THERE MAY BE DELAYS, OMISSIONS OR INACCURACIES IN THE DOW JONES CONTENT. THE DOW JONES CONTENT IS PROVIDED “AS IS”, WITHOUT ANY WARRANTIES. DOW JONES AND ITS AFFILIATES, AGENTS AND LICENSORS CANNOT AND DO NOT WARRANT THE ACCURACY, COMPLETENESS, CURRENTNESS, TIMELINESS, NONINFRINGEMENT, TITLE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE DOW JONES CONTENT, AND DOW JONES HEREBY DISCLAIMS ANY SUCH EXPRESS OR IMPLIED WARRANTIES. NEITHER DOW JONES NOR ANY OF ITS AFFILIATES, AGENTS OR LICENSORS SHALL BE LIABLE TO YOU OR ANYONE ELSE FOR ANY LOSS OR INJURY, OTHER THAN DEATH OR PERSONAL INJURY RESULTING DIRECTLY FROM USE OF THE DOW JONES CONTENT, CAUSED IN WHOLE OR PART BY ITS NEGLIGENCE OR CONTINGENCIES BEYOND ITS CONTROL IN PROCURING, COMPILING, INTERPRETING, REPORTING OR DELIVERING THE DOW JONES CONTENT. IN NO EVENT WILL DOW JONES, ITS AFFILIATES, AGENTS OR LICENSORS BE LIABLE TO YOU OR ANYONE ELSE FOR ANY DECISION MADE OR ACTION TAKEN BY YOU IN RELIANCE ON SUCH DOW JONES CONTENT. DOW JONES AND ITS AFFILIATES, AGENTS AND LICENSORS SHALL NOT BE LIABLE TO YOU OR ANYONE ELSE FOR ANY DAMAGES (INCLUDING, WITHOUT LIMITATION, CONSEQUENTIAL, SPECIAL, INCIDENTAL, INDIRECT, OR SIMILAR DAMAGES), OTHER THAN DIRECT DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL THE LIABILITY OF DOW JONES, ITS AFFILIATES, AGENTS AND LICENSORS ARISING OUT OF ANY CLAIM RELATED TO THIS AGREEMENT EXCEED THE AGGREGATE AMOUNT PAID BY YOU FOR THE DOW JONES CONTENT IN THE 12 MONTHS IMMEDIATELY PRECEDING THE EVENT GIVING RISE TO SUCH CLAIM. BECAUSE SOME STATES OR JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR LIMITATION OF LIABILITY FOR DAMAGES OR THE EXCLUSION OF CERTAIN TYPES OF WARRANTIES, PARTS OR ALL OF THE ABOVE LIMITATION MAY NOT APPLY TO YOU.

These Terms of Use, your rights and obligations, and all actions contemplated by these Terms of Use will be governed by the laws of England and Wales, and You and Dow Jones agree to submit to the exclusive jurisdiction of the English Courts.
If any provision in these Terms of Use is invalid or unenforceable under applicable law, the remaining provisions will continue in full force and effect, and the invalid or unenforceable provision will be deemed superseded by a valid, enforceable provision that most closely matches the intent of the original provision.