China hikes reserve ratio for banks; Bayer, Henkel gain in Germany
By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) -- European stock markets pushed deeper into negative territory on Friday, as nervous investors opted to reduce positions ahead of the weekend break and further developments from Ireland.
The Stoxx Europe 600 index (ST:STOXX600 269.04, -2.11, -0.78%) fell 0.9% to 268.75, after a strong prior session in which it gained 1.4%.
Officials in Dublin are holding talks with European Union and International Monetary Fund representatives to reach a course of action to solve the current debt crisis. Ireland’s finance minister, Brian Lenihan, said Thursday that the nation would be open to a bailout plan to shore up the banking sector.
A day after sizeable gains amid hopes for an Irish deal, investors were selling stocks in Europe ahead of the weekend and any potential news on the Irish crisis.
“This development is consistent with the overall market sentiment of the recent days and weeks with positive (e.g. QE2, macro indicators) and negative (e.g. European sovereign debt crisis) news alternating and causing equity markets to oscillate,” said Christoph Riniker, head of strategy research at Bank Julius Baer & Co.
The U.S. Federal Reserve’s latest round of quantitative easing, known as QE2, is aimed at reviving the sluggish economic recovery.
“We believe that the bulk of the year-end rally is behind us and therefore expect the current sideways tending pattern to persist towards year-end,” Riniker said in emailed comments. “With a positive outlook for 2011, we recommend using setbacks to establish or increase equity positions.”
Comments from Fed Chairman Ben Bernanke, who is speaking at a conference in Frankfurt, are also monitored by markets. In a prepared statement, Bernanke said the slow pace that China is taking to strengthen its currency is causing difficulties for the global economy.
A lone gainer, the Irish ISEQ index (XX:IEOP 2,785, +9.82, +0.35%) rose 0.6% to 2,794.69 on Friday, helped by a 4.3% gain for Allied Irish Banks (IE:AIB 0.45, +0.04, +8.41%) , which is due to report earnings Friday.
The German DAX 30 index (DX:DAX 6,819, -12.62, -0.19%) logged a new 2010 closing and 52-week high in the prior session, but failed to hang onto earlier positive territory on Friday, though its losses were less pronounced.
The DAX fell 0.2% to 6,820.67, with support from drug giant Bayer AG (DE:BAYN 57.56, +0.95, +1.68%) , which rose 2.4% the day after saying it will cut 4,500 positions by 2012 as part of a restructuring plan, taking a related one-time charge of 1 billion euros ($1.37 billion) expected by the end of that period.
Shares of adhesive maker Henkel AG & Co. (DE:HEN3 46.45, +0.63, +1.38%) rose 1% after Barclays Capital upgraded it to overweight from equal weight, saying 2010 should “herald a period of attractive and less volatile profit growth.”
In France, the CAC 40 index (FR:PX1 3,848, -20.13, -0.52%) dropped 0.4% to 3,852.30, with a 2.7% fall for French bank Natixis SA (FR:KN 3.75, -0.09, -2.31%) .
The FTSE 100 index (UK:UKX 5,716, -52.37, -0.91%) dropped 0.9% to 5,718.29. Shares of enterprise software firm Autonomy Corp. (UK:AU. 1,438, +39.00, +2.79%) bucked the negative trend to rise 3.7%.
Miners such as Rio Tinto PLC (RIO 68.71, +2.95, +4.49%) (UK:RIO 4,209, -73.00, -1.71%) fell 1.9% as China announced a 0.5% hike in its reserve requirement ratio for banks. Mining stocks tend to suffer from signs that China wants to slow its growth on expectations of falling demand for natural resources.
Shares of government contractor Capita Group (UK:CPI 667.50, -22.50, -3.26%) fell 3.5%, continuing to lose ground from Thursday’s news that public-spending cuts in Britain will hit second-half revenue growth harder than expected.
In the Netherlands, shares of semiconductor equipment maker ASML Holding NV (ASML 32.89, +1.04, +3.27%) (NL:ASML 24.52, +0.40, +1.66%) rose 1.8% after its chief financial officer, Peter Wennink, reportedly said Friday that he expects capital expenditure in the sector to rise next year.
Wennink also said ASML will return extra cash to shareholders via buybacks and dividends, The Wall Street Journal reported.
