Barclays, HSBC Holdings decline; Nestle, Rio Tinto up
European shares declined in a volatile session on Thursday, amid continued worries over the health of the economy after the European Central Bank made another cut to its key interest rate.
The pan-European Dow Jones Stoxx 600 index traded down 0.4% to 192.20 in a choppy session.
The European Central Bank lowered interest rates by 50 basis points to 2.0% as widely expected. See full story.
"The ECB really had little option but to act again given the clear, widespread evidence that the Eurozone recession is deepening," said Howard Archer, economist at IHS Global Insight.
Edmund Shing, strategist at BNP Paribas, added: "The ECB is widely seen to be behind the curve but what you may get is commentary accepting the fact that the euro-zone economy has got considerably worse in the last few months and that they will do what it takes to support the economy."
On a national level, the German DAX 30 index fell 0.7% to 4,391.74, the French CAC-40 index declined 0.6% to 4,390.53 while the U.K. FTSE 100 index traded down 0.7% at 4,150.77.
U.S. stock futures were also volatile. J.P. Morgan put out in-line quarterly results. Asian markets ended lower. Read more on Asia. Read indications.
Banks drop again
On Wednesday, the Stoxx 600 index closed with a 4.4% loss, pulled down by sharp price falls from banks such as HSBC Holdings , Deutsche Bank , and Barclays .
HSBC Holdings was hammered by worries about capital and dividend levels, Deutsche Bank said that it would post a fourth-quarter loss and Barclays is going to cut thousands of jobs.
On Thursday, HSBC Holdings fell another 4.5% and Barclays shares dropped another 3.7%.
Deutsche Postbank , another sharp decliner on Wednesday, plummeted 16.9%.
It was cut to underweight from neutral by J.P. Morgan, which sees the revised terms announced on Wednesday for a Deutsche Bank stake as negative for shareholders.
"There are a lot of question marks being posed again on the banking sector from both sides of the Atlantic and that weighs heavily," noted Shing.
Autos in focus
Daimler shares declined 4% in the auto sector.
Citigroup changed ratings of several Europe auto firms, cutting Daimler and Fiat , down 1.4%, to hold from buy, cutting GKN , down 6.7%, and Scania , up 0.4%, to sell from hold.
Citi says European auto profits will "disappear," with margins seen at -0.2% and aggregate net income negative. It sees an almost universal passing of dividends.
It prefers BMW rather than Daimler as its core German holding due to the truck volume concerns at the latter. Peugeot is its choice for the small car/value names, with "by far the lowliest valuation in the sector."
It upped BMW , down 2.3%, to buy from sell and Peugeot , down 2.1%, to buy from hold.
European new-passenger-car registrations fell 7.8% to 14.7 million in 2008, the sharpest decline in 15 years, the European Automobile Manufacturers' Association reported. See Europe car sales story.
Nestle up
Still, Nestle led the food sector higher, up 2.2%. The firm was upped to conviction buy from neutral by Goldman Sachs after underperformance since Oct. 31.
"We believe investors have grown increasingly concerned about the potential for an organic sales miss in 2009 (and the potential for an expensive take-out of L'Oreal .
"Based on our estimates which factor in a multi-year global recession, we believe the former is already largely discounted into the share price while the latter fear is overblown," the broker said.
Miners were also strong, with Rio Tinto shares up 4.9% after unveiling in-line fourth-quarter production numbers.
