European shares suffer worst loss for months

European shares fell to post their worst weekly fall in nearly three months, with financial stocks hit by Obama's vague proposals to curb risk-taking at banks.

European shares suffer worst loss for months

European shares fell on Friday to post their worst weekly fall in nearly three months, with financial stocks hit by U.S. President Barack Obama's vague proposals to curb risk-taking at banks.

The FTSEurofirst 300 index of leading European shares closed down 1.1 percent at 1,024.95 points, losing for the third consecutive session.

The index lost 2.6 percent for the week, its worst weekly percentage fall in nearly three months and is down 2 percent this year.

"It is all to do with the banks. The bottom line here is we have no idea how the banking plan is about to unfold, if indeed it does," said Peter Dixon, economist at Commerzbank.

"This is all at a time when markets are already fairly wobbly. The markets are always going to sell off when there is uncertainty. I think this is the story for today and will be for the next week."

Banks took the most points off the index after Obama unveiled tough new proposals on Thursday to limit risk-taking in the banking sector and restrict some of the banks' most lucrative operations.

Credit Suisse, Barclays, UBS and Deutsche Bank fell 3.9 to 6.4 percent.

Across Europe, the FTSE 100 index was down 0.6 percent, Germany's DAX fell 0.9 percent and France's CAC 40 was 1.1 percent lower.

Oils slip

Energy stocks were under pressure as crude slipped 1.2 percent. BP, Royal Dutch Shell and Total lost 0.8 to 1.7 percent.

The VDAX-NEW volatility index, a measure of investor risk appetite or aversion, was up 2.8 percent after earlier hitting a six-week high.

The higher the volatility index, which is based on sell and buy options on Frankfurt's top-30 stocks, the lower is investors' appetite for risky assets such as cyclical stocks, and equities in general.

On the upside, mining shares rebounded as metal prices recovered from earlier losses. Copper was up 1.4 percent.

Anglo American, Eurasian Natural Resources Corporation and Xstrata gained 0.7 to 2.4 percent.

Munich Re gained 0.3 percent on market talk that U.S. investor Warren Buffett might be buying shares.

In the United States, after a raft of mixed U.S. results, global major General Electric topped Wall Street expectations in its fourth-quarter earnings.

"They are finally saying the environment is improving, and this is very important. Margins seem to be resilient, the order book is pretty good, and on a first look, there seems to be no bad surprises from GE Money," said David Thebault, head of quantitative sales trading, at Global Equities in Paris.

Reuters
Last Mod: 22 Ocak 2010, 20:04
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