Europe shares fall as China ups rates

By Brian Gorman

LONDON (BestGrowthStock) – European stocks fell on Monday in thin trade, after an interest rate rise in China sparked worries about global growth, with Europe’s carmakers badly hit by the rate hike and also by Beijing’s move to cut registration quotas.

At 1200 GMT, the FTSEurofirst 300 (.FTEU3: ) index of top European shares was down 0.8 percent at 1,138.21 points. But trading was subdued, with UK markets closed for a holiday.

Auto shares fell with the STOXX Europe 600 Automobiles & Parts (.SXAP: ) index down 3.2 percent. Daimler (DAIGn.DE: ), Peugeot (PEUP.PA: ), Porsche (PSHG_p.DE: ), BMW (BMWG.DE: ) and Volkswagen (VOWG.DE: ) fell between 2.1 and 5.6 percent.

Beijing announced measures to limit new car registrations to tackle congestion in the Chinese capital.

“They may do the same in other cities in China, and it will hurt the German makes like Daimler,” said Heino Ruland, strategist at Ruland Research, in Frankfurt.

“Banks are also suffering, with the China rate hike and as it looks like Portugal will be forced to accept the rescue package of the IMF and EU.”

Spanish banks Banco Santander (SAN.MC: ) and BBVA (BBVA.MC: ) fell 2.8 and 1.6 percent respectively.

On Saturday — Christmas Day — China’s central bank surprised investors with a 25-basis-point rate rise in benchmark deposit and lending rates, its second increase in just over two months, as it looks to rein in inflation.

The People’s Bank of China said it would raise the benchmark lending rate by 25 basis points to 5.81 percent and lift the benchmark deposit rate by 25 basis points to 2.75 percent.

Across Europe, Germany’s DAX (.GDAXI: ) and France’s CAC 40 (.FCHI: ) fell 1.4 and 1.2 percent respectively; Spain’s IBEX 35 (.IBEX: ) fell 1.9 percent.

The pan-European index has gained 6.7 percent in December and is still on track for its biggest monthly gain since March.

The benchmark is up more than 76 percent from its lifetime low of March, 2009, with several major economies having emerged from recession, helped by stimulus from governments and central banks worldwide.

Traders expect low volumes this week as many institutional investors have closed the books for the year.

“This implies low trading volumes, like last week, bearing potential risk of large swings in either direction,” traders at Close Brothers said.

DNO RISES

Among individual shares, Norwegian oil firm DNO (DNO.OL: ) rose 8 percent after Iraq’s new oil minister is quoted as saying his government would honor production contracts like one DNO has with the Kurdish regional government.

Swedish specialty steelmaker SSAB (SSABa.ST: ) rose 3 percent after Handelsbanken Capital Markets raised its rating to “accumulate” from “reduce”.

In macroeconomics, the Conference Board leading economic index (LEI) for the euro zone rose 0.7 percent to 114.3 in November, a sharper rise than October’s 0.3 percent and one that points to continued economic recovery.

Ruland said he believed the market rally would resume after the holiday period. “Investors have been selling bonds and buying equities, and this will continue as equities still look cheap,” he said.

U.S. futures pointed to a lower open on Wall Street, which resumes trade after the Christmas break.

(Additional reporting by Harro ten Wolde; Editing by Jane Merriman)

Europe shares fall as China ups rates