Europe Bank Stocks Hit By Worries Over Slowing Western Economies
August 18 2011 - 7:22AM
Dow Jones News
European banking stocks suffered a sharp selloff Thursday as
worries over slowing Western economies hit financial markets, with
Morgan Stanley (MS) cutting its GDP growth forecasts for the euro
area.
The revival of a proposal to impose a tax on European financial
transactions at a recent meeting between German and French leaders
was also weighing on banking stocks, said Arun Melmane, an analyst
at Investec Securities. "There's not been any good newsflow in this
sector for a while."
U.K. banking shares fell sharply, with Barclays PLC (BCS) down
4.8%, HSBC Holdings PLC (HBC) 3.4% lower, Lloyds Banking Group PLC
(LYG) falling 4.8% and Royal Bank of Scotland Group PLC (RBS) 4.4%
off.
Stocks on the Continent were also hit, with French and Spanish
banks suffering heavy losses. Societe Generale S.A. (GLE.FR) was
down 5.1%, Credit Agricole S.A. (ACA.FR) 3.5% lower and BNP Paribas
S.A. (BNP.FR) 3.2% down. Banco Santander S.A. (STD) was 2.9% lower,
while Banco Bilbao Vizcaya Argentaria S.A. (BBVA) was down
3.6%.
Dexia SA (DEXB.BT) was leading the declines in Belgium with an
8% slump. "It's just the volatility of the market," said Alex
Koagne, a financial analyst at Natixis. "The underlying problem is
that the situation in Europe is still very difficult. This is
nothing on the fundamentals [of Dexia]."
Morgan Stanley warned earlier Thursday that it sees "material
risk of outright recession," and cut its 2011 euro area GDP growth
forecast to 1.7% from 2.0%, and its 2012 forecast to 0.5%, from
1.2%. Goldman Sachs, meanwhile, cuts the 2012 Global GDP growth
forecast To 4.4% From 4.6%.
Morgan Stanley cited a number of new factors that are likely to
weigh on growth in the second half the year, such as slower global
trade growth, tougher term funding markets for banks and additional
austerity measures announced in several countries.
For nearly two years, many investors and analysts have been
arguing that the European banking sector is undercapitalized and
overexposed to potentially risky debts of cash-strapped countries
like Greece, Portugal, Ireland, Spain and Italy.
-By Michael Haddon, Dow Jones Newswires; 4420-7842-9289;
michael.haddon@dowjones.com
(Michelle Maatouk contributed to this article.)
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