Europe stocks slump on ECB report; Santander hits Madrid

AFP/LondonEurope’s equities sank yesterday on disappointment over the reported size of potential bond purchases from the European Central Bank, while Madrid was rocked by giant bank Santander’s massive capital hike. Most European markets gave up at least half of the gains from the day before. London’s FTSE 100 shed 1.05% to close at 6,501.14 points, while Frankfurt’s DAX 30 lost 1.92% to 9,648.50 points and the CAC 40 in Paris dropped 1.90% to 4,178.07. Madrid’s Ibex 35 felt the heaviest losses plunging 3.91% to 9,719 points, with shares in Spanish banking titan Santander collapsing on shock news of a €7.5bn ($8.8bn) capital raising. The second heaviest losses were witnessed in Milan, where the FTSE MIB index fell 3.27% to 18,177 points after shares in troubled bank Monte dei Paschi di Siena plunged more than 8% after having soared the day before on takeover speculation. The euro recovered to $1.1835 in London, after tumbling Thursday to $1.1754 — last seen in December 2005 — on ECB stimulus speculation. ECB staff have presented its governing council with various models for a new asset purchase programme to ward off deflation in the euro area, Bloomberg news agency reported. However, governors took no decision on the design or implementation of any package after the presentation, Bloomberg said, quoting sources who attended the meeting. In Madrid, investors were still shell-shocked by the surprise news from Santander, which is the eurozone’s largest bank by market value. Banco Santander’s share price nosedived 14.09% to close at €5.89 yesterday after it unveiled plans the day before to raise the fresh funds. The unexpected move by new Santander chairwoman Ana Botin was aimed at dispelling concerns among investors that its financial cushion is thinner than those of other big European banks. The shares sale will amount to about 10% of the current market value of the lender. In New York Wall Street stocks traded lower at midday yesterday after a mixed jobs report. The Dow Jones Industrial Average shed 0.67% to 17,787.75, while the broad-based S&P 500 slid 0.55% to 2,050.70 and the tech-rich Nasdaq Composite Index reversed 0.42% to 4,716.18. While the US economy added a solid 252,000 jobs in December and the unemployment rate dropped to 5.6%, hourly wages fell and the labour participation rate dropped. That mixed data is unlikely to shake the US Federal Reserve from its current course of raising interest rates later this year although 2014 turned out to be the best year for job generation in the US in 15 years.