Banks Lead European Shares Lower

By DAVID JOLLY
The New York Times
Published: Jan 14, 2009

Stocks fell Tuesday in Europe and Asia, as banks took a beating amid gnawing fears for the global economy.

“Hopes that the euro-zone’s relative lack of indebtedness would allow it to fare comparatively well in the global downturn have been dashed by the slump in the industrial sector and insufficient policy action,” Jonathan Loynes, chief European economist at Capital Economics in London, wrote in a research note. “The region may now be among the last to emerge from recession.”

In Berlin, the government of Chancellor Angela Merkel’s coalition government announced a second set of stimulus measures, just weeks after Germany criticized other European countries for their eagerness to spend money. Despite the measures, worth 50 billion euros, or about $66 billion, over two years, Mr. Loynes estimated that the European economy would shrink about 2 percent in 2009.

In European afternoon trading, the Dow Jones Euro Stoxx 50 index, a barometer of euro zone blue chips, fell 2.2 percent, while the FTSE 100 index in London was down 1.8 percent. The CAC 40 in Paris slid 2.2 percent, and the DAX in Frankfurt fell 2.1 percent.

European banks led the market lower, with Barclays down nearly 13 percent.

Banco Santander fell 4.2 percent in Madrid after a report that the Spanish authorities were investigating the bank over the more than $3 billion its clients lost on investments in the Bernard L. Madoff scandal. Royal Bank of Scotland, which said Tuesday that it would sell its entire stake in Bank of China to raise capital fell 6.6 percent.

In New York, bank shares were hit Monday, with Citigroup dropping 17 percent, and Bank of America off 12 percent.

Trading in index futures suggested Wall Street stocks would open lower. On Monday, the Standard & Poor’s 500 index fell 2.3 percent. The broad American market is now down 3.7 percent in the new year.

In Asian trading, the Tokyo benchmark Nikkei 225 stock average fell 4.8 percent Tuesday, as Mizuho Financial Group fell 8.4 percent and Mitsubishi UFJ Financial fell 6.2 percent.

Electronics companies also fell, amid reports that Sony and Toshiba would post operating losses for the current financial year, as plummeting demand and a strong yen take their toll on sales.

Sony, which fell 8.8 percent, declined to comment on the reports. Toshiba fell 8.6 percent. A Toshiba spokesman, Keisuke Ohmori, said the company has not revised its figures “at this time, despite the difficult environment.”

The two companies are to report their performance for the three months to the end of December on Jan. 29.

The coming earnings season — and Japanese trade data next week — is expected to reflect several challenges facing Japanese exporters: demand in the United States and Europe has been flagging for months as consumers cut back or delay spending on goods that are not essential, like computer games, flat screen televisions and cars; and the yen remains strong compared to the dollar and euro, making Japanese goods more expensive for American and European shoppers.

With the Japanese economy already in recession, companies have delivered a string of profit warnings in recent months, scaled back output and cut jobs. More such announcements are widely expected, analysts and economists say.

In other Asian trading, the Hang Seng index in Hong Kong fell 2.2 percent, while the Shanghai Stock Exchange composite index fell 2 percent. The S&P/ASX 200 in Sydney fell 0.8 percent.

Crude oil futures for February delivery fell 82 cents to $36.77 a barrel.

The dollar rose against major currencies. The euro fell to $1.3293 from $1.3362 late Monday in New York, while the British pound fell to $1.4587 from $1.4822. The dollar rose to 1.1172 Swiss francs from 1.1147 francs and to 89.25 yen from 89.21.

© The New York Times. All rights reserved. This article originally appeared in The New York Times.