Navigation

Primary Navigation

Secondary Navigation

Search

European stocks fall despite Asia gains, BoE credit-crunch plan

AFP - Tuesday, April 22

LONDON (AFP) - - European equities struggled on Monday, despite a sharp rally earlier in Asia, as London investors digested a 100-billion-dollar Bank of England plan to get British banks lending again.

Asian stocks surged earlier Monday as hopes grew that the worst of the global financial crisis may be over, after buoyant US company results had boosted Wall Street before the weekend, analysts said.

Japanese share prices closed up 1.63 percent, Hong Kong surged 2.17 percent and Sydney won 3.1 percent on easing concerns about the outlook for American corporate earnings, dealers said.

But European markets failed to benefit, as investor sentiment was hit by resurgent credit fears and crude oil prices striking a historic 117.40 dollars per barrel in morning deals.

The British capital's FTSE 100 leading shares index slid 0.06 percent to 6,052.60 points, Frankfurt's DAX 30 lost 0.70 percent to 6,795.12 points and in Paris the CAC 40 reversed 0.89 percent to 4,917.48.

The European single currency stood at 1.5871 dollars, after striking a record peak at 1.5984 last Thursday.

In London on Monday, the Bank of England (BoE) attempted to soothe the effects of the global credit crunch, with a 100-billion-dollar plan to free up Britain's slowing home loan market.

The BoE said it would allow high street banks to swap mortgage-backed securities for government bonds in a bid to boost their liquidity at a time when banks are increasingly reluctant to lend to each other.

Major global banks are rapidly tightening their lending criteria as fears persist over the sector's exposure to the collapsed subprime or high-risk housing market in the United States.

"The Bank of England liquidity package is obviously going to help the market," said Jim Wood-Smith, head of research at Williams de Broe.

"But, banking stocks have turned lower on talk that (British finance minister) Alistair Darling will force all banks to undergo a rights issue.

"Investors are selling short in anticipation of the banks raising money," added Wood-Smith.

Britain's second-largest bank, the Royal Bank of Scotland, confirmed Monday it would ask shareholders for a cash boost following reports that its capital reserves had been depleted by the credit crunch and its ABN Amro takeover.

RBS saw its share price dive 3.71 percent to 369.75 pence in early afternoon trade, while peer Barclays fell 2.32 percent to 484.50 pence.

In Frankfurt, Germany's Commerzbank sagged 1.16 percent to 22.91 euros and French peer dipped 2.16 percent to 73.53 euros.

Before the weekend, Wall Street had rallied nearly two percent as investors cheered earnings reports from Citigroup, Google and other big firms, taking them to indicate that a period of intense financial turmoil may be starting to abate.

"The fact that the key US financial institutions didn't deliver negative surprises anymore reinforced the view that the global credit crisis may have passed its trough," said Won Jong-Hyuck, an analyst at SK Securities in Seoul.

Meanwhile this week, Bank of America, Credit Suisse Group, Texas Instruments, Microsoft and AT&T are some of the major companies set to announce their results.

Recommend this article

Average (0 votes): Sign in to recommend this article »

Most Recommended Stories »