German chancellor’s CDU party crushed in state elections
By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) — European stock markets fell sharply Monday, with Deutsche Bank AG leading several banks lower after being named in a U.S. mortgage-related lawsuit, while a defeat for the party of Germany’s chancellor in regional elections weighed on already downbeat sentiment.
The Stoxx Europe 600 index XX:SXXP -3.38% fell 2.8% to 226.44 in afternoon trading. It tumbled 2.4% on Friday after data showed no growth in U.S. payrolls in August, a result well short of expectations. Asian stocks slumped Monday, while U.S. markets are closed for the Labor Day holiday.
A big decliner for the Stoxx 600 was Clariant AG CH:CLN -15.06% . Shares sank 14% after the Swiss specialty-chemical group cut its full-year sales and profit outlook owing to a strong Swiss franc and the global economic slowdown.
Other chemical stocks followed Clariant lower, such as BASF AG DE:BAS -4.95% , down 4.5%, and Bayer AG DE:BAYN -3.39% off 2.6% in Frankfurt.
Meanwhile, European bank shares also fell sharply.
“The banking sector continues to remain under pressure today as it underperforms across Europe,” said Manoj Ladwa, senior trader at ETX Capital, in emailed comments. “The chances of a near-term recovery remain slim as euro-zone debt concerns, structural reform and a lawsuit for allegedly mis-selling mortgage debt all weigh heavy on the sector.”
Shares of Royal Bank of Scotland Group PLC RBS -4.69% UK:RBS -10.59% sank 11% after the bank was named last week in a lawsuit by the Federal Housing Finance Agency. The agency alleges that major U.S. and European banks misrepresented the quality of mortgages they sold during the housing bubble, and it is suing for billions of dollars in losses. Read U.S. sues big banks over mortgage losses
Also named in the lawsuit were Deutsche Bank AG DB -6.04% DE:DBK -7.73% , down 8.6%, Societe Generale SA FR:GLE -7.85% SCGLY -6.02% down 8%, Barclays PLC BCS -7.67% UK:BARC -6.63% , down 6%, and HSBC Holdings PLC UK:HSBA -3.32% HBC -1.44% , off 2.8%.
The French CAC 40 index FR:PX1 -4.52% was among the hardest-hit; it dropped 3.7% to 3,033.58. In addition to Societe Generale, shares of BNP Paribas SA FR:BNP -6.31% slumped 6.3% and Credit Agricole SA FR:ACA -5.22% slid 5.8%.
The Spanish IBEX 35 index XX:IBEX -3.85% dropped 3%, as Banco Santander SA ES:SAN -5.33% STD -5.19% stumbled 5%.
German election results weigh
The bad news seemed to keep coming after negotiations between Greece and international lenders stalled on Friday amid disagreement over the nation’s progress on reducing its budget deficit.
In Germany, Chancellor Angela Merkel’s Christian Democratic Union, which leads a coalition government, was trounced in a regional election on Sunday. Some analysts believe the results are a sign of voters venting their frustration at how the government has handled the European debt crisis. Read No homecoming for Germany’s Merkel
“It is rather inconvenient timing for more problems to surface as the market is still digesting the weak U.S. jobs figure last Friday,” said Jordan Lambert, trader at Spreadex Ltd, in emailed comments.
Losses picked up in the afternoon for the German DAX 30 index DX:DAX -4.35% , tumbling 3.8% to 5,324.68. Along with Deutsche Bank, Commerzbank AG DE:CBK -5.86% slid 5%. Heavyweight industrial conglomerate Siemens AG SI -3.23% DE:SIE -4.30% slid nearly 4% and losses for chemical companies such as BASF also weighed.
Data out Monday showed private-sector activity across the euro zone grew at the slowest rate in two years in August, with the Markit composite purchasing managers index dropping to 50.7 from 51.1 in July. A preliminary estimate showed the data at 51.1.
In London, the FTSE 100 UK:UKX -3.04% fell 2.2% to 5,172.55 as big banks and resource stocks dragged the index south. Shares of Royal Dutch Shell PLC RDS.A -1.35% , UK:RDSA -3.29% slid 3% and miner Rio Tinto PLC UK:RIO -4.48% RIO -2.05% slumped over 4%.
