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Europe: markets engulfed in wave of pessimism

Anastasia Tretyakova, Junior analyst, Global Markets (Finam)

On Tuesday, April 3, European equity benchmarks closed the session in negative territory as yields on Spanish state bonds rose by seven basis points to 5.42%. According to reports, the jobless rate in Spain, where over half of all young people are unemployed, went up in March for the eighth month in a row after the government approved a draft budget for 2012, which provides for state spending cuts to the tune of EUR 27.3 bn. According to the Labor and Social Security Ministry, the number of people receiving unemployment benefits increased by 38,769 last month to 4.75 mn. The government also stated that Spanish debt liabilities could reach 79.8% of GDP in 2012, up from 68.5% last year. Negative sentiment was also fuelled by the release of uninspiring data on US factory orders, which increased 1.3% in February, against the forecast growth of 1.5%. By the final bell, regional indicator STXE 600 sank 1.1% to close at 264.29. The British benchmark stock indicator FTSE 100 slipped 0.62%, the French CAC 40 index dropped 1.62% and the German DAX gauge ended 1.05% lower.

European banks sustained tangible losses, with Italian Banca Popolare di Milano Scarl plunging 6.6%, Spanish Banco Santander slumping 4% and Italy’s large-scale lender UniCredit shedding 5%. French catering company Sodexo gave up 2.3% after being downgraded by Morgan Stanley analysts from Market Perform to Sell.

Meanwhile, British oil company Cairn Energy added 4% to its market cap after agreeing to take over Norwegian Agora for USD 375 mn, with 43% of the price to be paid in cash and the remaining 57% in equity.

Swiss pharmaceutical industry supplier Lonza advanced 1.6% after disclosing the name of its new CEO. Stefan Borgas, dismissed from the post last January, will be replaced by Richard Ridinger, who worked with BASF and Henkel before his latest appointment.

The shares of the world’s biggest insulin producer Actelion climbed 2.7% after Credit Suisse Group analysts upgraded their rating from Neutral to Outperform.

By 7:17 am GMT, futures contracts for primary European stock indexes were trading lower on the publication of US Federal Open Market Committee (FOMC) minutes, which showed no hint of additional monetary stimulus on the part of the Fed.

British FTSE 100 index futures for June settlement were trading 0.23% lower, German DAX index futures for June settlement were off 0.85% and French CAC 40 benchmark index futures for April settlement were 0.65% down.

IndexCountryValueChangeChange, %YTD, %
ATX Austria 2,147.13 -7.40 -0.34% 13.50%
BEL20 Index Belgium 2,334.76 -19.77 -0.84% 12.06%
FTSE 100 United Kingdom 5,838.34 -36.55 -0.62% 4.77%
DAX Index Germany 6,982.28 -74.37 -1.05% 18.38%
IBEX 35 INDEX Spain 7,824.50 -218.30 -2.71% -8.66%
S&P/MIB Italy 15,624.23 -324.63 -2.04% 3.54%
AEX Netherlands 322.03 -4.36 -1.34% 3.06%
OMX Nordic 40 Scandinavia 1,023.17 -1.36 -0.13% 13.72%
CAC 40 France 3,406.78 -56.13 -1.62% 7.82%
SMI Switzerland 6,258.66 -40.72 -0.65% 5.43%