Veolia and Vallourec sink in Paris after broker downgrades
By Simon Kennedy, MarketWatch
LONDON (MarketWatch) — European stocks tumbled Thursday, as renewed worries over growth and the impact of the sovereign crisis hit bank stocks particularly hard, while cement firm Holcim Ltd. was a big faller after its results disappointed investors.
The Stoxx Europe 600 index XX:SXXP -4.19% dropped 2.7% to 231.38 in afternoon trading as fear returned to the market after three fairly calm days.
U.S. stock futures were also pointing to heavy losses for Wall Street. Futures on the Dow Jones Industrial Average DJ1U -2.78% dropped around 200 points.
Losses for Europe were spread across all countries and market sectors, though banks were among the biggest fallers.
Shares in Barclays PLC UK:BARC -9.69% BCS -10.79% sank 6.2% in London, Societe Generale FR:GLE -7.75% fell 6.6% in Paris and Dexia SA BE:DEXB -9.12% slumped 9% in Brussels. The losses for SocGen and Dexia came even after a ban on short-selling introduced last week.
“Lots of little bits of news are generating a bit of panic selling,” said Will Hedden, sales trader at IG Index. “Volumes still seem pretty low, which might be exacerbating the losses.”
Hedden said a downgrade of global growth forecasts by Morgan Stanley was getting a lot of attention. Adding to worries, Ewald Nowotny, a member of the European Central Bank’s governing council, said he fears Europe could enter a long period of limited growth like Japan.
The Wall Street Journal also reported Thursday that U.S. regulators are stepping up their scrutiny of European banks amid worries that they could face funding difficulties in the U.S. The report came a day after data from the ECB showed an unnamed bank had borrowed $500 million from the central bank — the first time it had made such a dollar-denominated loan since February.
In its decision to cut growth forecasts, Morgan Stanley said the U.S. and euro zone are “hovering dangerously close to recession.”
The firm cut its outlook for global growth in 2012 to 3.8% from 4.5%, though it said another recession is “not our base case,” because the Federal Reserve and European Central Bank are likely to take more action.
Losses were particularly heavy in Germany, where Commerzbank AG DE:CBK -8.63% fell 5.5%. The growth concerns also hit car makers. Shares in Vokswagen AG DE:VOW3 -3.00% fell 5.2% and BMW AG DE:BMW -5.87% dropped 4.8%.
The DAX 30 index DX:DAX -5.36% slumped 4% to 5,711.04.
Holcim, Boskalis fall
Shares in Switzerland’s Holcim CH:HOLN -6.91% sank 6.8%. The cement producer said its second-quarter earnings fell 13% as a strong Swiss franc and high raw-material prices hurt profitability.
French rival Lafarge SA FR:LG -3.88% also dropped 3.5%, contributing to a 2.6% drop for the CAC 40 index FR:PX1 -4.47% to 3,170.27.
Other decliners in Paris included Veolia Environnement SA FR:VIE -5.46% , which fell 5.5% after UBS downgraded the stock to neutral from buy. The broker said Veolia’s restructuring plans are positive, but will take time, bring new risks and dilute earnings in the near term.
Vallourec SA FR:VK -7.20% fell 6.3% after Goldman Sachs cut its rating on the steel-tubing producer to neutral from buy, citing higher costs.
Dutch firm Royal Boskalis Westminster NV NL:BOKA -13.68% was the worst performer on the Stoxx 600 index, slumping around 13%. The maritime-services group reported an 8% drop in first-half profit and said economic unrest is likely to delay investments in large-scale oil and gas projects.
In London, mining stocks ranked alongside banks as the worst performers, reflecting the worries about global growth.
Shares in Xstrata PLC UK:XTA -8.09% fell 6% after the firm and its partners approved further investment to expand the Cerrejon coal mine in Colombia. The FTSE 100 index UK:UKX -4.93% fell 2.4% to 5,203.12.
Few stocks posted gains in Europe. Among them, shares in Vestas Wind Systems DK:VWS -3.81% rose 2%, adding to a 24% gain in the previous session that was driven by better-than-expected earnings.
