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| Stock price movements are displayed on electronic screens inside the Madrid stock exchange |
Europe’s main stock markets slumped yesterday in a poor start to the week as investors reacted to news of sliding business confidence in eurozone economic engine Germany, dealers said.
London’s FTSE 100 index of top companies ended the day off 0.24% at 5,838.84 points, while in Frankfurt, the Dax 30 gave up 0.54% to finish at 7,413.16 points.
In Paris the CAC 40 fell by 0.94% to 3,497.22 points, Madrid’s IBEX 35 lost 1.12% to 8,138.40 points, and Milan’s FTSE Mib closed 0.78% lower at 15,867 points.
In foreign exchange trade, the euro eased to $1.2910 from $1.2985 in New York late on Friday. Gold prices fell to $1,761.60 an ounce on the London Bullion Market, down from $1,784.50.
“European financial markets dropped on fears about faltering global growth, highlighted by a weaker than expected German Ifo survey which reminded investors that the euro area’s strongest and largest economies are feeling the heat of the debt crisis,” said ETX Capital trader Ishaq Siddiqi.
“The data also raised fears that Germany could enter a recession by early next year, pressuring the euro currency against the dollar.
“On top of that, the uncertain situation in Spain rattles nerves with the country expected to present a new structural reform programme at the end of this week and announce results of its bank stress tests,” he added.
German business confidence fell for the fifth month in a row in September to the lowest level since February 2010, data showed yesterday, suggesting that the eurozone debt crisis was increasingly hurting the German economy.
The Ifo economic institute’s closely watched business climate index dropped to 101.4 points in September from 102.3 points in August.
“September’s fall in the German Ifo business survey is a reminder that even the eurozone’s strongest economies are suffering from a severe economic downturn,” said Jennifer McKeown, analyst at Capital Economics research group.
The Ifo data dashed market expectations for an unchanged reading, according to analysts polled by Dow Jones Newswires.
It also dragged down US stocks, with the Dow Jones Industrial Average shedding 0.21% to 13,550.90 points in late morning trade.
The S&P 500-stock index fell 0.31% to 1,455.60, while the tech-heavy Nasdaq tumbled 0.71% to 21.20%.
“Clearly, Europe is moving deeper into recession,” Fred Dickson at DA Davidson & Co. said in a client note.
“This presents a big problem for European countries with financial problems (Spain, Italy) but also weakens the case for stronger European countries to kick in huge amounts of funds into the various European Union financial rescue plans.”
Markets were already spooked after the leaders of Germany and France clashed on Saturday over plans to monitor Europe’s crisis-hit banks.
“That poor Ifo has not helped sentiment which was already pretty negative on the weekend disagreements between (German Chancellor Angela) Merkel and (French President Francois) Hollande over the timetable for banking union,” said Michael Hewson, analyst at CMC Markets trading group.
At the weekend, Merkel and Hollande differed over a key plank of crisis-fighting: tighter checks on Europe banking sector.
“I support a banking union, it is an important measure and we must proceed step-by-step,” Hollande told reporters following a meeting in Germany, while stressing that such a framework should be in place “the earlier the better.”