Chemical maker Kemira slides on outlook; BMW stake boosts SGL
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — European equities lost ground Friday, pressured by ongoing worries over whether euro-zone leaders will be able to get a grip on a debt crisis that poses a growing risk to the region’s banking sector and the world economy, analysts said.
The Stoxx 600 index XX:SXXP -0.59% fell 0.8% to 232.07, extending its 1.3% pullback on Thursday. The pan-European benchmark’s on track for a 3.7% weekly loss.
The index briefly popped higher toward midday as a news report said a proposal that would see the European Central Bank lend money to the International Monetary Fund that could be used to finance bailouts was gaining traction.
An unnamed euro-zone official told Dow Jones Newswires that Germany and the European Central Bank remained opposed but that discussions may begin soon amid a lack of other alternatives. Read Market Pulse about the report.
But the gains for European shares proved fragile.
Investors’ focus over the last two days has shifted from rising bond yields on the periphery of the euro zone to rising dollar funding costs for European banks, said Steen Jakobsen, chief economist at Saxo Bank in Copenhagen.
“The interbank market is continuing to show increasing signs of stress as a consequence of the euro-zone crisis. As normal funding lines dry up talk that central banks may soon be forced into coordinating additional liquidity support is on the rise,” said Jane Foley, senior currency strategist at Rabobank in London.
Among banks, Lloyds Banking Group UK:LLOY -2.00% lost 1.9% and HSBC Holdings PLC UK:HSBA -0.49% fell 0.8% in London, while Deutsche Bank AG DE:DBK +0.33% declined 1.3% in Frankfurt. In Paris, shares of Credit Agricole SA FR:ACA -2.01% and Societe Generale SA FR:GLE -1.89% both fell 1.5%.
Among the region’s major indexes, Germany’s DAX DX:DAX -0.59% lost 0.7% to 5,810.84, while the CAC-40 index FR:PX1 -0.20% slipped 0.3% to 3,001.45 in Paris. London’s FTSE 100 index UK:UKX -1.11% sank 1.2% at 5,360.23.
European Central Bank President Mario Draghi signaled that the institution’s unlikely to move more aggressively to contain the crisis amid calls by France and others to play a bigger role in providing a firewall against further contagion across the euro zone. Read more about pressure on ECB to act as lender of last resort.
Instead Draghi, in his first major address since becoming the region’s top central banker on Nov. 1, told a banking forum it was up to national governments to move quickly to implement previously agreed-upon plans to leverage up the firepower of the European Financial Stability Facility, the euro-zone rescue fund.
“Where is the implementation of these long-standing decisions?” Draghi asked. Read Market Pulse on Draghi’s remarks.
“Draghi showed no signs of a change in stance, pointing toward governments to act quickly, and gave no indication that the ECB will step up its purchases in the euro-zone bond markets,” wrote strategists at UBS.
European equities came under pressure Thursday as bond yields in Italy and Spain continued to rise, with Spain forced to pay a euro-era record yield just below 7% to sell 10-year debt.
The market showed signs of stabilizing on Friday, however, with Spain’s 10-year yield ES:10YR_ESP +0.59% slipping around 4 basis points to 6.41% and Italy’s 10-year yield IT:10YR_ITA +2.85% edging up 2 basis points to 6.73%.
The European Central Bank‘s been seen buying Italian and Spanish bonds this week amid worries rising funding costs could push Italy, the region’s third-largest economy, or Spain, its fourth-largest, into bailouts that would be too big for the euro zone to handle.
Also Friday, shares of fine chemical maker Kemira Oyj FI:KRA1V -13.40% dropped more than 14% in Helsinki. The company lowered its full-year guidance, citing sluggish demand and higher prices for raw materials.
Miners also were under pressure, with shares of BHP Billiton PLC UK:BLT -1.81% declining 2.6% and Rio Tinto PLC UK:RIO -1.31% falling 1.9% in London.
On the rise, shares of SGL Carbon SE DE:SGL +1.88% added 1.1%, gaining after German automaker BMW AG DE:BMW -0.09% acquired a 15.2% stake in the firm.
The move comes eight months after BMW rival Volkswagen AG DE:VOW3 -0.59% took a nearly 10% stake in the producer of lightweight carbon materials, Dow Jones Newswires reported.
BMW’s shares fell 1.1%, while Volkswagen dropped 1.8%.
William L. Watts is a reporter for MarketWatch in Frankfurt.
