Reuters/London
Shares in major European economies suffered their biggest quarterly loss in nine years, hit by concerns the global economy was slipping into recession and the euro zone debt crisis was deepening with Greece facing possible default.
A financial trader monitors his computer screens inside the Frankfurt Stock Exchange in Frankfurt. Among the worst to suffer in the recent sell-off was Germany’s DAX which had outperformed all other European markets in the first half of the year. The German blue-chip index, home to
conglomerate Siemens and automakers Daimler and BMW, lost 25.4% in July-September, its worst quarterly performance since the third quarter of 2002
The steep sell-off this quarter, wiping $1.2tn off European share values, was sparked by an intensification in the euro zone sovereign debt crisis and concerns the US could be heading for a recession.
US and German government bonds, however, were in demand as investors sought shelter in safe-haven assets.
Karen Olney of UBS said European stock valuations may be cheap but investors would remain cautious until euro zone politicians can come up with a decisive plan to finally put to rest the bloc’s debt crisis, now threatening Italy and Spain, its third and fourth largest economies.
London’s FTSE-100 index slid 1.32% to 5,128.48 points yesterday. The DAX fell 2.44% to 5,502.02 points and the CAC-40 measure dropped 1.51% to 2,981.96 points. Elsewhere, Milan fell 1.39%, Lisbon 1.25%, Amsterdam by 1.34%, Zurich by 1.37% and Madrid was down 0.54%.
Among the worst to suffer in the recent sell-off was Germany’s DAX which had outperformed all other European markets in the first half of the year.
The German blue-chip index, home to conglomerate Siemens and automakers Daimler and BMW, lost 25.4% in July-September, its worst quarterly performance since the third quarter of 2002.
France’s CAC 40, and Spain’s IBEX 35 also posted their biggest three-month fall since the third quarter of 2002, despite their regulators, along with those from Italy and Belgium, banning short selling of financial stocks starting on August 12.
The CAC 40 fell 25.1% in July-September, with French bank Societe Generale losing 51% over the same period—its biggest quarterly loss ever.
The IBEX 35 index, meanwhile, was off 17.5%, while Italy’s FTSE MIB was down 26.5%.
Britain’s FTSE 100 was down 13.7%, faring better than other major European markets but still posting its worst three-month performance in nine years.
That compared with a 17.1% fall over the same period for the pan-regional STOXX Europe 600 index, which was its biggest quarterly loss since the fourth quarter of 2008 after the global economy was sent into a tailspin following the collapse of Lehman Brothers.
In terms of valuations, the DAX and the CAC 40 carried a 12-month forward price-to-earnings ratio of 8 and 7.7 respectively, slightly cheaper than the FTSE 100’s 8.8 and the US S&P 500’s 10.9, data from Thomson Reuters Datastream showed.
Morgan Stanley was “overweight” telecoms and healthcare, and “underweight” banks and industrials.
However, RBS analysts said both the DAX and the FTSE 100 looked hard done by, based on their index composition, with German auto stocks and UK oil stocks among the most attractive on a relative value basis.
