Europe stocks at 10-week closing low on debt fears

By Harpreet Bhal

LONDON (BestGrowthStock) – European shares ended at a 10-week closing low on Thursday, falling for the third-straight session, with banks under pressure as fears of a euro zone contagion from Greece’s debt crisis rattled investors’ nerves.

Stocks were also pressured after the European Central Bank (ECB) President Jean-Claude Trichet said the bank did not discuss the option of buying euro zone government bonds during a meeting where it kept interest rates on hold at 1.0 percent.

The FTSEurofirst 300 index of top European shares closed down 1.6 percent at 1,006.66 points, the lowest closing level since February 26 in a choppy session as shares swung between positive and negative territory.

The index has lost more than 5 percent so far this week, on track for the worst weekly decline since early March. It has tumbled 3.5 percent year-to-date.

“We’ve had quite a pronounced correction and it is entirely appropriate given where the market was. A high degree of complacency had been manifest in the market as investors simply pursued the Q1 earnings story,” said Jeremy Batstone-Carr, head of research at Charles Stanley.

The banking sector was the top faller, with Barclays, Societe Generale, Banco Santander and BBVA down 4.6 to 7 percent.

France’s BNP Paribas fell 2.5 percent, reversing earlier gains following strong results. The bank also revealed a 5 billion euro ($6.71 billion) exposure to Greece, the largest among major French banks.

Among the gainers, Capgemini rose 2.9 percent after Europe’s largest computer consultancy forecast a return to growth in the second half of the year.

Swiss Re added 0.3 percent after the world’s second-biggest reinsurer boosted its capital by around $3 billion, giving it confidence it can repay a costly convertible loan from billionaire Warren Buffett.

AXA, however, shed 6.1 percent after the French insurer’s first-quarter sales missed forecasts.

Telecom gear maker Alcatel-Lucent sank 6.5 percent to a near-three-month low after reporting a much wider first-quarter net loss than expected and missed revenue forecasts, blaming a shortage of components.

Across Europe, Britain’s FTSE 100, Germany’s DAX and France’s CAC 40 fell 0.8 to 2.2 percent.

CONTAGION WORRIES PERSIST

The ECB kept benchmark interest rates at a record low of 1 percent for the 12th month in a row and ignored calls for extra cash injections or the use of its ‘nuclear option’ — a purchase of Greek and possibly other countries’ government bonds to halt the debt crisis that is threatening the euro’s survival.

The 110 billion euro bailout of Greece failed to allay concerns on whether Athens can implement tough austerity measures and worries on the risk of the crisis spreading to other countries such as Spain and Portugal.

“The markets wants something more specific. They want money flowing to Greece and something like government bond purchases,” said Thomas Meissner, economist at DZ Bank.

The premium investors’ demand to buy Portuguese government bonds over benchmark Bunds hit a euro lifetime high and the equivalent Spanish spread was also at euro-lifetime record wide levels after Trichet’s comments.

Stock Investing

($1=.7453 Euro)

(Editing by Jon Loades-Carter)

Europe stocks at 10-week closing low on debt fears