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 Friday, as nervous investors reduced positions ahead of the weekend break and took in a reserve-requirement hike for banks in China.
The Stoxx Europe 600 index (ST:STOXX600 268.20, -2.95, -1.09%) fell 1% to 268.39 in afternoon trading, 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 in an effort 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.
Allied Irish Banks in focus
Bucking the negative trend in Europe, the Irish ISEQ index (XX:IEOP 2,801, +25.80, +0.93%) gained 0.6% on Friday.
Allied Irish Banks (IE:AIB 0.44, +0.02, +5.77%) rose 7%, paring some gains following the release of a trading statement. The bank said that customer accounts fell by around 13 billion euros from the beginning of 2010 to the close of business on Nov. 16. They have been affected by “current adverse international sentiment towards the Irish sovereign and banking sector,” the bank said in a statement.
Excluding Poland, the loan to deposit ratio on Sept. 30 was 159% compared to 151% on June 30, Allied Irish Banks said.
Nearly all European stock markets, however, traded lower on Friday.
“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.”
In the prior session, the German DAX 30 index (DX:DAX 6,810, -22.10, -0.32%) logged a new 2010 closing and 52-week high, but it failed to cling to positive territory Friday.
The DAX fell 0.3% to 6,811.43, with shares of Deutsche Bank AG (DB 54.94, -0.96, -1.71%) (DE:DBK 40.29, -0.77, -1.88%) down 2% and Commerzbank AG (DE:CBK 6.08, -0.07, -1.17%) off 1.5%.
On the upside, Bayer AG (DE:BAYN 57.61, +1.00, +1.77%) rose 2% the day after the drug giant said 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 46.93, +1.11, +2.42%) rose 2.1% 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 3,839, -29.25, -0.76%) dropped 0.9% to 3,834.50 amid bank weakness. Societe Generale SA (FR:GLE 41.83, -0.98, -2.28%) fell 2.3% and BNP Paribas SA (FR:BNP 52.93, -0.71, -1.32%) slipped 1.4%.
The FTSE 100 index (UK:UKX 5,702, -67.20, -1.17%) declined 1.2% to 5,699.06.
Miner Rio Tinto PLC (RIO 67.28, -1.43, -2.08%) (UK:RIO 4,194, -88.00, -2.06%) fell 2.5% 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. Read more about China’s move.
Shares of government contractor Capita Group (UK:CPI 674.50, -15.50, -2.25%) fell 2%, continuing to lose ground on Thursday’s news that public-spending cuts in Britain will hit second-half revenue growth harder than expected.
Banks also weakened in London, with shares of Standard Chartered PLC (UK:STAN 1,800, -52.00, -2.81%) down 2.5%, Lloyds Banking Group PLC (UK:LLOY 66.16, -1.63, -2.40%) off 2.6% and HSBC Holdings PLC (HBC 52.30, -1.07, -2.01%) (UK:HSBA 655.60, -10.90, -1.64%) off 1.9%.
In the Netherlands, shares of semiconductor-equipment maker ASML Holding NV (ASML 33.68, +0.79, +2.40%) (NL:ASML 24.65, +0.53, +2.20%) rose 2.1% after the company’s 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.
