GLOBAL MARKETS: European Stocks Stay Down; Banks Lead Falls

GLOBAL MARKETS: European Stocks Stay Down; Banks Lead Falls
    By Andrea Tryphonides    Of DOW JONES NEWSWIRES  


LONDON (Dow Jones)--European stocks continued to decline Monday, with banks and insurance stocks leading the falls amid a general unwillingness to take bold moves in a relatively quiet session.

"Markets appear to be jittery, as we are standing in the eye of the storm trying to get a handle on the what, when and how (U.S. President Barack) Obama's stimulus plans will affect the financial system," said Alan Plaugmann, head of futures and fixed income at Saxo Bank.

At 1100 GMT, the Dow Jones Stoxx 600 index was down 0.7% at 189.8, having suffered its worst week since the week ending Jan. 23. European bourses were choppy as they struggled for direction. London's FTSE 100 index was down 0.7% at 4160.8, Frankfurt's DAX index declined 0.7% to 4383.0 and Paris's CAC-40 index was 0.7% lower at 2978.3.

In a quiet session for earnings and macro data, the focus was firmly on financials. Legal & General was the biggest blue-chip decliner in London, falling 7.3% to 45.9 pence amid concerns that its finances had been weakened by its exposure to the stock market. The company insisted, however, that its capital position remained robust.

Elsewhere, BNP Paribas decreased 1.7% to EUR26.0. The Belgian government is meeting executives of BNP Paribas to try to find a way forward for the troubled Belgian bank Fortis, according to Finance Minister Didier Reynders. Fortis declined 3.7% to EUR1.1.

And in further testament to banks tightening purse strings in what is likely to be another tumultuous year for earnings and forward outlooks, ING Group dropped 3.2% to EUR5.70 after revealing it will no longer be sponsoring the Formula 1 program after the '09 season.

Meanwhile, the Markit iTraxx Crossover index, which measures the cost of default insurance on 50 mostly sub-investment-grade borrowers, moved back above 1100 for the first time in nearly two weeks as early losses in European stock markets weighed on sentiment.

At 0840 GMT, the Crossover index stood at 1100/1104 basis points, according to data provider Markit, around 27bps wider than Friday's close of 1075bps midlevel. The index last closed above 1100bps on Feb. 2.

European stocks had also taken their cue from Asian share markets, which had declined overall. Sentiment in Japan was dampened by a larger than expected contraction in GDP, while disappointment that G7 ministers failed to come up with a detailed plan to support the world economy also weighed on sentiment. Japan's Nikkei 225 fell 0.4%. Hong Kong's Hang Seng index was 0.6% lower and the Korean Kospi Composite was down 1.4%.

On Wall Street Friday, the Dow Jones Industrial Average closed down 1%, as did the Standard & Poor's 500.

In the foreign exchanges, the dollar was steady in Europe following the disappointing Japanese data, amid continued concern for the health of the banking sector. At 1125 GMT, the dollar was trading at Y91.70, down from Y91.86 late Friday in New York. But the euro fell to $1.2765 from $1.2863.

Elsewhere, crude oil futures eased back, with little fresh news flow to provide momentum. "We continue to correct for the distortions created in the first part of last week by the rolling of the indices," said Olivier Jakob of Petromatrix. ICE April Brent was down 19 cents at $44.62/bbl and Nymex March light, sweet crude was down 10 cents at $37.41/bbl.

Bond prices gained ground in Europe Monday, as stocks fell, and the gold price eased back.

The U.S. stock markets are closed Monday for the Presidents Day holiday, and European markets are likely to remain directionless as a result. The Dow front-month futures contract was 0.4% lower at 7750 and the S&P 500 front-month futures contract was 0.4% down at 816.5.

There is no important economic data due for release.

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

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(END) Dow Jones Newswires

February 16, 2009 06:38 ET (11:38 GMT)


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