LONDON: European equities tumbled yesterday after the US government unveiled higher than expected recession data for the last quarter of 2008 and investors tracked fresh turmoil in the banking sector.
London’s FTSE 100 index dived 2.18 percent, while the Frankfurt DAX plummeted 2.50 percent and in Paris the CAC 40 fell 1.54 percent.
But Wall Street was mixed in afternoon trading, with the Dow Jones slipping 0.08 percent while the tech-heavy Nasdaq index rose 0.39 percent.
Augustine Faucher at Economy.com said a report on the 6.2-percent US quarterly contraction at the end of last year — the worst since 1982 — was “perhaps the clearest indication of the current woes of the US economy.”
Markets also digested more bad news on the banks after Britain’s Lloyds Banking Group (LBG) said its HBOS unit made a pre-tax loss of £10.8bn ($15.4bn) in 2008.
LBG shares plunged 22.27 percent on the London Stock Exchange.
The US government also said it will own up to 36 percent of Citigroup under a deal to convert the capital it injected into the ailing bank to ordinary shares — a move seen by analysts as a bad sign for the banking sector.
The report led Citigroup shares to dive 34 percent in afternoon trading.
Most Asian bourses also fell, with Hong Kong losing 0.7 percent as investors targeted heavyweight bank HSBC ahead of its annual results next week.
But Tokyo rallied 1.48 percent as investors looked past more gloomy reports on the health of Asia’s biggest economy and pinned their hopes on a recovery.
“The outlook for the week ahead will be uncertain again as the global banking crisis tightens its grip in both Europe and the US,” said Ian Griffiths, dealer at CMC Markets trading service in London.
“The banking sector is yet again in focus after the government reached a deal to substantially increase their stake in Citigroup,” he said.
Joshua Raymond, market strategist at spread betting company City Index in London, said: “The banks are lower on the back of the Lloyds numbers.”
The Lloyds results came one day after Royal Bank of Scotland unveiled a record British corporate loss of 24.1 billion pounds, coupled with an announcement that it will need a new state bailout worth up to 25.5 billion.
RBS shares shed 20.00 percent, after jumping more than 25 percent on Thursday.
In Asia on Friday, Mumbai stocks fell 0.71 percent, Shanghai shed 1.81 percent, and Singapore closed down 1.40 percent, after Wall Street had dived overnight on weak economic data and a glum report on the banking sector.
In Europe, Swiss stocks closed down 1.68 percent, Dutch stocks lost 1.73 percent, Milan plunged 2.29 percent and Madrid plummeted 2.44 percent. The only exception was Belgium, where the Bel-20 index rose 0.50 percent.
The European single currency sank against the major currencies yesterday following the release of dire US and EU economic growth data, as more financial stimulus bids failed to move investors. In late London trade, the European single currency fell to 1.2661 dollars from 1.2743 late on Thursday.
Against the Japanese currency, the dollar sank to 98.00 yen from 98.46 yen on Thursday. US government data showed that the US economy shrank at a 6.2 percent annual pace in the fourth quarter, far worse than the 5.4 percent rate expected by analysts, highlighting the meltdown in activity late last year.
Official EU figures showed that inflation in the 16 countries using the euro dropped in January by the sharpest rate on record, slumping to 1.1 percent in the face of a sharp economic downturn.
