💎 Fed’s first rate cut since 2020 set to trigger market. Find undervalued gems with Fair ValueSee Undervalued Stocks

Euro zone debt worries drag down Europe shares

Published 11/26/2010, 07:42 AM
Updated 11/26/2010, 07:44 AM

* FTSEurofirst 300 falls 1.3 pct after two days of gains

* Persistent euro zone debt crisis keeps investors nervous

* Financials, miners among biggest decliners

By Atul Prakash

LONDON, Nov 26 (Reuters) - European shares retreated on Friday, pressured by banks and miners, as concerns about the euro zone debt crisis lingered and investors speculated other peripheral countries may also seek financial help.

Financial shares featured among the biggest losers, with the STOXX Europe 600 banking index falling 2.9 percent. Bank of Ireland, Bankinter and BNP Paribas fell 3.1 to 4.6 percent.

At 1213 GMT, the FTSEurofirst 300 index of top European shares was down 1.3 percent at 1,078.96 points after falling to a low of 1,077.51 earlier in the session.

Portuguese and Spanish bonds rose on growing concerns about the debt crisis. The Financial Times Deutschland said the majority of euro zone states and the European Central Bank were urging Portugal to apply for a financial bailout.

But European officials denied the report and Spain ruled out needing help to manage its finances, despite concerns that the debt crisis could spread from Ireland.

"It's difficult not to remain nervous. The focus will stay on Europe, certainly for the early part of the next week. We may see that move across the United States once we see U.S. non-farm payrolls figures late next week," said Keith Bowman, analyst at Hargreaves Lansdown.

"The problem in Ireland is the political situation. Markets would be slightly calmer if they could see that this bailout is going to be carried through by politicians. But a potential change of government is making everyone nervous."

Ireland's government is likely to see its parliamentary majority cut to two, less than two weeks ahead of a crucial vote on next year's austerity budget. Sources said an 85 billion euro ($112.7 billion) rescue package for Ireland from the EU and the International Monetary Fund would likely be announced on Sunday.

"The bailout remains highly uncertain as parts of the Irish government may yet withdraw support, putting the rescue in jeopardy," said Stefan Angele, head of investment management at Swiss & Global Asset Management.

Britain's FTSE 100, Germany's DAX and France's CAC40 fell 1.2 to 1.6 percent. Spain's IBEX fell 2.7 percent, while the Thomson Reuters Peripheral Eurozone Countries Index was down 2.9 percent.

VOLATILITY

Appetite for riskier assets fell sharply, with the VDAX-NEW volatility index, a key European barometer of investor anxiety, surging more than 15 percent to a 7-week high. The higher the index, the lower investors' appetite for risk.

Technicals also turned bearish as the Euro STOXX 50, the euro zone's blue-chip index, fell 1.9 percent to 2,714.26 points to hover below its 50-percent Fibonacci retracement of a fall from a high in April to a low in May.

The level had provided some support in recent sessions. The next support levels are seen at 2,669.29 -- a 38.2 percent retracement level -- and at October's low of 2,690.88.

Miners felt the pinch as metals prices fell sharply on a stronger euro. BHP Billiton, Anglo American and Antofagasta fell 2.6 to 4.3 percent.

Geopolitical concerns also weighed on markets. North Korea said impending military exercises by South Korea and the United States were pushing the region towards war. On the upside, BT rose 3.1 percent as the British telecoms company said it sold a 5.5 percent stake in Indian IT services group Tech Mahindra.

($1=.7540 Euro)

(Editing by David Hulmes)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.