European stocks sink 5.6 percent in sea of red
The sell-off tracked global equities losses, as the MSCI's main index of world stocks hit its lowest level in over a year.business Updated: Jan 21, 2008 21:16 IST
European shares sank 5.6 per cent by midday on Monday, threatening their worst one-day fall since the attacks of September 2001 as investors rattled by the specter of a US recession dumped stock across the board.
At 7:04 am EST, the FTSEurofirst index index of top European shares was down 5.1 per cent at 1,289.42 points, having earlier hit 1,280.94, a level not seen in eighteen months.
The sell-off tracked global equities losses, as the MSCI's main index of world stocks hit its lowest level in over a year.
Banks were the worst sector, contributing a quarter of the index's losses. And heavyweight energy stocks were among the top individual negative weights, with BP (BP.L: Quote, Profile, Research) down 4.6 per cent and Total (TOTF.PA: Quote, Profile, Research) 4.5 per cent.
Investors were left with little in terms of safe haven options: utilities, seen as a possible defensive hedge in times of strife, also fell, with Germany's E.ON (EONG.DE: Quote, Profile, Research) sliding 6 per cent.
"Getting pummeled," said Henk Potts, equity strategist at Barclays Stockbrokers. "A mixture of weak global economic data, poor corporate data, increasing fears about the possibility of a recession ... has left investors drowning in a sea of red."
"This looks like a climax sell-off," said Brewin Dolphin Chief Strategist Mike Lenhoff, adding that the slump looked overdone.
"People are left to hold oversold positions until they're blue in the face -- interest rates are going to be a lot lower by the year-end and some of these valuations could look silly then."
Monday's fall is the index's eleventh drop in 14 sessions. It has already lost nearly 15 per cent this month.
Germany's DAX. GDAXI plummeted 7.2 percent, while Britain's FTSE. FTSE slumped 5.3 percent and France's CAC 40. FCHI slid 6.7 percent.
Insurers, Banks Bloodied
Insurers slid on fears over their bond exposure as investors sold off following news that a unit of Ambac Financial Group (ABK.N: Quote, Profile, Research) had lost a crucial "AAA" rating."
Swiss Re (RUKN.VX: Quote, Profile, Research) sank nearly 10 per cent, while Allianz (ALVG.DE: Quote, Profile, Research) lost 9.5 per cent.
Banks took a beating again on Monday, with the DJ Stoxx bank index down 5.6 per cent. HSBC (HSBA.L: Quote, Profile, Research) fell 4.9 per cent and Santander (SAN.MC: Quote, Profile, Research) dropped 7.5 per cent.
Societe Generale (SOGN.PA: Quote, Profile, Research), which lost eight per cent on Friday on market rumors that the French bank could report write-downs, lost a further eight per cent.
"It's becoming more and more difficult as the market is now in panic mode," Hugues Rialan, managing director in charge of discretionary asset management at Robeco France.
"We're falling back into the crisis of confidence in the financial sector. The banks have been reassuring the market over their exposure to US mortgage-related investments, but now we realize there is nothing reassuring about it," he said.
Among the few stocks on the upside, Friends Provident (FP.L: Quote, Profile, Research) rose 4 per cent after US private equity firm JC Flowers said it was considering an offer for the group.
Swedish trucks group Scania (SCVb.ST: Quote, Profile, Research) rose 2.2 per cent on renewed speculation of a tie-up with former suitor MAN.