Europe's Markets Unconvinced By Bailout Plans

 
   By Martin Essex 
   Of DOW JONES NEWSWIRES 
 

LONDON (Dow Jones)--European stock prices are poised to open sharply lower yet again as the euro and oil prices fall in early European business Monday.

"The U.S. dollar continues to crush the euro as it trades at a 14-month high. Continued turmoil in the European banking sector over the weekend and a lack of a coordinated response from European governments highlights the problems facing the euro," said Oliver Stevens, head of dealing at IG Markets.

"The markets were clearly unimpressed at the delay in passing the economic rescue package and the economic data last week from both sides of the pond indicated that there is much damage already down to the global economy. The question now seems to be how bad a recession we are in not whether we are going into a recession. Fear and uncertainty are likely to continue to rule today and how low we go is anyone's guess," he added.

The euro was trading at $1.3592 at 0604 GMT, down from $1.3772 at the end of New York business Friday. Meanwhile the dollar was easier at 103.36 Japanese yen, down from 105.32, as the yen gained from increased risk aversion.

In the stock markets, prices are expected to open with more falls. In London, the FTSE 100-share index is likely to open down 197 points at 4783, the DAX in Frankfurt may open down 213 at 5584 and the CAC-40 in Paris is expected to open down 199 at 3890, according to BGC Partners, the spread-betting firm.

"The Fed's bailout plan may have been passed... but so far there's been no real reaction in credit markets and because of this the natural assumption is going to be that the measures won't work, even if such a call is rather premature," said Matt Buckland, dealer at CMC Markets.

"Current expectations are for it all to be rather chaotic as European trade gets underway. Financial stocks are certainly going to be under pressure again... but the overall impact is going to cross all sectors with the prospect of slowing demand weighing on all the heavyweights."

In the commodity markets, prices fell on concerns about industrial demand. ICE November Brent crude was trading at $87.71 per barrel at 0615 GMT, down from $90.25 in late business Friday. Nymex November light crude was at $91.22, down from $93.88. Elsewhere, spot gold was trading at $829.90 per ounce, down from $838.80.

"With the TARP passing through, and EMU governments becoming more active on the intervention front as well, the key question from here is whether enough has been done to sustainably shore up confidence," said Charles Diebel at Nomura.

"Initial evidence would suggest markets are unconvinced and it goes without saying that it will take them some time to recover from the wounds inflicted in recent weeks," he added.

In the government bond markets, the 'flight to quality' trade sent 10-year U.S. Treasury notes up 18/32 to 103-27 at 0625 GMT. The notes' yield fell to 3.535% from 3.60%. December bunds were trading at 103.47, up 0.81.

-By Martin Essex, Dow Jones Newswires; +44 (0) 20 7842 9464; martin.essex@dowjones.com

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(END) Dow Jones Newswires

October 06, 2008 02:34 ET (06:34 GMT)


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