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European Stocks Drop

Posted on: February 16, 2009


AFP – 27 mins ago

Photo credit : Loki Fuego on Flickr

europe-map-byLONDON (AFP) – Europe’s leading stock markets fell on Monday as investors tracked the ailing banking sector and digested evidence of a deep Japanese recession as well as a weekend meeting of key finance chiefs.

London’s FTSE 100 index of leading shares fell 0.91 percent to 4,151.33 points, Frankfurt’s DAX 30 slid 0.79 percent to 4,378.33 points and in Paris the CAC 40 declined 0.76 percent to 2,975.09.

The DJ Euro Stoxx 50 index of leading eurozone shares shed 0.94 percent to 2,207.41 points. Wall Street was shut on Monday owing to a public holiday in the United States.

The European single currency fell to 1.2771 dollars.

“There remains a bitter taste in the mouth after (British bank) HBOS’s loss last Friday, Japan’s terrible GDP (gross domestic product) figure and the failure of the G7 to tell the market anything new following their meeting over the weekend,” said City Index Market Strategist Joshua Raymond.

Lloyds Banking Group (LBG) had warned on Friday that its HBOS division would suffer a 2008 pre-tax loss of about 10 billion pounds (11.2 billion euros, 14.5 billion dollars) because of the credit crunch.

LBG’s share price slumped by more than 40 percent on Friday in reaction to the surprise warning from the partly-nationalised bank. It continued to slide early on Monday before recovering to stand up 0.65 percent at 61.90 pence.

“The HBOS numbers will mean that Lloyds will continue to be in focus this week,” said Raymond, adding: “The market knows (full) nationalisation could be the next step” for LBG.

Elsewhere on Monday investors digested poor data out of Japan and the weekend summit of finance ministers from the world’s leading industrialised nations.

Japan warned that it was in the deepest economic crisis since World War II, after Asia’s biggest economy suffered its worst contraction in almost 35 years.

The economy shrank for a third quarter running in the three months to December as the global slowdown crushed demand for Japanese exports, a key pillar of the world’s number two economy.

Japanese share prices ended narrowly mixed on Monday. Meanwhile Group of Seven finance ministers at the weekend urged bold reforms to the world financial system while leaving little doubt that the global economic turmoil is far from over.

Italy’s Finance Minister Giulio Tremonti called on Saturday for a “new world economic order” as he wrapped up the crisis meeting over which he presided in Rome.

In a joint declaration, the G7 called for “urgent reforms” of the international financial system and reiterated a bleak outlook for the world economy, after fresh data showed the eurozone recession deepening.

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