Business
Europe stocks slump after Tokyo plunge
Europe stocks slump after Tokyo plunge
AFP/London
European stock markets slumped yesterday, with most indices dropping more than 2% after Tokyo shares plunged owing to weak Chinese data and signs that the US Federal Reserve may soon taper massive stimulus measures, analysts said. |
London’s benchmark FTSE 100 index sank 2.16% to stand at 6,692.39 points in afternoon deals, Frankfurt’s Dax 30 fell 2.67% to 8,303.28 points and in Paris the Cac 40 shed 2.39% to 3,954.31.
The Madrid market gave up 1.82% and Milan dropped 2.72%.
European equities were pulling back sharply after recent record and multi-year highs for some indices on the back of improving world economic data despite ongoing eurozone strains and some still weak numbers out of the US and China.
Tokyo’s main index ended down more than 7% yesterday as investors took profits also after strong recent gains.
On the Wall Street, stocks fell overnight after Federal Reserve chief Ben Bernanke had told Congress on Wednesday that the US central bank could scale back stimulus measures soon if economic conditions improved.
US stocks opened sharply lower yesterday after the plunge in the Japanese market sparked a selloff throughout Asia and Europe.
In the first 10 minutes of trade the S&P 500 was down 1.1%, while the Dow lost 0.6% and the Nasdaq 0.9%.
In foreign exchange activity, the European single currency climbed to $1.2899 from $1.2855 on Wednesday. The dollar slid to ¥101.59 from ¥103.10.
The euro was higher despite news of a downturn in eurozone private sector business activity.
The Markit Eurozone Composite Purchasing Managers Index registered 47.7 points in May, a three-month high and well up on April’s 46.9 points albeit still below the threshold of 50 points indicating growth or recession.
On the London Bullion Market, the price of gold dropped to $1,386 an ounce from $1,408.50 late in New York on Wednesday.
“The main focus is all about the reaction in the financial markets to Ben Bernanke’s testimony,” said Neil MacKinnon at VTB Capital financial group.
“In my view it says more about an equity market that is ‘overheated’ and due a correction rather than any suggestion from the Fed that monetary stimulus is about to be withdrawn,” he wrote in a note to clients.
“To believe that the Fed is imminently about to tighten policy would be a mistaken assessment. Why do that when the US economy is in a soft patch and when CPI inflation is falling below target?” MacKinnon added.