Business | Economy
Recession gloom sets the mood in the euro zone
European equities ended sharply lower after a vol-atile week that saw both Germany and the euro zone economy as a whole slip into recession, as many investors remained reluctant to dip their toes into turbulent markets.
- By Rachel Morarjee, Financial Times
- Published: 23:41 November 15, 2008
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European equities ended sharply lower after a volatile week that saw both Germany and the euro zone economy as a whole slip into recession, as many investors remained reluctant to dip their toes into turbulent markets.
"The current levels of volatility have created a vicious circle. High volatility means that investors stay on the sidelines, but one of the reasons volatility is high is because volumes are low," said Nick Nelson, European equity strategist at UBS.
The benchmark pan-European FTSE Eurofirst 300 rose 0.8 per cent on Friday to 859.58, but failed to recover ground lost earlier in the week and ended 6 per cent down on the previous Friday's close.
Grim week
"The market is in a bottoming out phase. We have poor macro-economic news and mixed corporate earnings which add up to powerful headwinds for equities," said Nelson.
Financial stocks lang-uished at the bottom of the market as concerns about deteriorating asset quality continued to gnaw at valuations. Austria's Raiffeisen International and Erste Bank, which both have substantial operations in eastern Europe, were among the sharpest fallers. Raiffeisen fell 21.1 per cent to 22.14 euros while Erste lost 27.8 per cent to 14.29 euros over the week.
Dexia, the Benelux bank, dived 12 per cent to 4.40 euros after posting a quarterly loss of 1.54 billion euros Thursday. It said it had agreed to sell its FSA insurance business to bond insurer Assured Guaranty.
Irish banks fell steeply with Bank of Ireland down 21 per cent to 1.28 euros and Allied Irish Banks 18.6 per cent lower at 2.96 euros, while France's Crédit Agricole lost 16.9 per cent to 9.43 euros and Credit Suisse dropped 14 per cent to 32.68 Swiss francs.
It was a grim week for carmakers as new passenger car registrations fell for the sixth straight month in October, falling by 14.5 per cent. Markets most affected were Italy, Spain and the UK, and demand for both small cars and bigger vehicles was sharply lower.
In France, Peugeot shed 14.3 per cent to 15.42 euros and Renault lost 13.5 per cent to 18.70 euros. Italy's Fiat slipped 7.2 per cent to 5.64 euros, and Germany's Daimler lost 8.9 per cent to 23.22 euros.
Vallourec, which makes steel tubes for carrying oil and gas, was the biggest gainer on the CAC-40 after raising its sales forecast for the second half. It climbed 7 per cent to 83.79 euros.
Among commodities stocks, Yara International, the Norwegian fertiliser manufacturer, said it would temporarily stop production at a French plant and cut output in the Netherlands due to weak demand.
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