Share

European shares sink in broad sell-off

Paris - European stocks fell on Friday for the third straight session in brisk trade, with a broad index hitting a three-and-a-half month low as tension between Russia and the West as well as concerns around losses at Banco Espirito Santo gnawed at sentiment.

Technical charts sent a strong negative signal on Germany's DAX benchmark, with the index breaking below its 200-day moving average for the first time in two years.

"The situation in Argentina, the problems with Banco Espirito Santo and geopolitical tensions, particularly with Russia, are fuelling this bout of profit taking," Barclays France fund manager Philippe Cohen said.

Argentina defaulted on Thursday for the second time in 12 years following the collapse of last-ditch talks with holdout creditors, raising worries over the outlook for Latin America's No. 3 economy.

Spanish stocks underperformed again on Friday, with Madrid's IBEX dropping 1.9%, as traders cited worries over Spanish companies' exposure to Latin America.

Shares in Banco Espirito Santo shed 4.5%, adding to its 42% drop on Thursday when the bank posted a €3.6bn loss and higher-than-expected provisions to cover its exposure to companies owned by its founding Espirito Santo family.

Shares in France's Credit Agricole, which holds a significant stake in the bank, have lost 6.8% this week.

The massive loss at the Portuguese bank has dragged Europe's banking sector index down 3.4% this week, reviving concerns over the sector, particularly in Southern Europe, hit hard by the years-long sovereign debt crisis.

Investors have also been worrying about the impact of sanctions against Russia. This week, the European Union and the United States targeted its energy, banking and defence sectors in the strongest international action yet over Moscow's support for rebels in eastern Ukraine.

About 40 European blue-chips derive more than 5% of their revenues from the Russian market, including Austria's Raiffeisen Bank and Finnish tyre maker Nokian Renkaat , according to data from MSCI, while European oil majors also have significant operations in Russia.

By 11:38, the FTSEurofirst 300 index of top European shares was down 1.4% at 1 330.81 points, a level not seen since mid-April, while the eurozone's blue-chip Euro STOXX 50 index fell 1.5% at 3 069.60 points, a level not seen since late March.

Adding to the negative mood, investors expect strong US monthly job data to strengthen the case for an early interest rate hike by the US Federal Reserve.

The Fed's ultra-loose monetary policy has helped fuel a near 40% rally in European equities over the past two years.

"I still think good data is good for the stock market in the long term because it means the global recovery is still on track," Tradenext trader Farhan Ahmad said.

"Short term, however, we may see some reverberation in the stock market and some further weakening."

US non-farm payrolls, due at 14:30, are expected to show 233 000 jobs were added last month, with the unemployment rate seen steady at 6.1%.

Among the top losers on Friday, shares in ArcelorMittal , the world's largest steelmaker, sank 6.4% after cutting its forecast for earnings this year.

French telecom group Iliad dropped 7.5% after making an offer for T-Mobile US that set up a potential bidding war with Sprint.

Bucking the trend, Europe's No. 2 insurer AXA, rose 1% after reporting a better-than-expected first-half net profit.

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Voting Booth
Do you think corruption-accused National Assembly Speaker Nosiviwe Mapisa-Nqakula will survive a motion of no confidence against her?
Please select an option Oops! Something went wrong, please try again later.
Results
No, her days are numbered
42% - 373 votes
Yes, the ANC caucus will protect her
58% - 509 votes
Vote
Rand - Dollar
18.94
-0.2%
Rand - Pound
23.91
-0.1%
Rand - Euro
20.43
+0.2%
Rand - Aus dollar
12.35
+0.0%
Rand - Yen
0.13
-0.2%
Platinum
908.50
+1.3%
Palladium
1,017.25
+1.5%
Gold
2,220.32
+1.2%
Silver
24.84
+0.8%
Brent Crude
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.8%
Resource 10
57,251
+2.8%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
All JSE data delayed by at least 15 minutes Iress logo
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE