Paris: European stocks slid in early trade on Tuesday, echoing sharp losses on Wall Street and in Asia as lingering fears over the stability of the financial sector rattled investors.
AXA, Europe’s second biggest insurer, dropped 6%, dragged down by renewed concerns over the company’s balance sheet and the prospect of a capital increase.
“We believe the solvency remains at low levels leaving little margin of error in case markets remain under pressure,” UBS analysts wrote in a note, saying there is an 80 percent probability of a capital hike.
Other insurers were also hit, with Aegon down 9% and Allianz down 2%. The DJ Stoxx insurance index, down 3.2% on the day, has now lost 32% since the start of the year.
Banking shares, down 29% year-to-date, were also on the downside, with Societe Generale losing 2.7%, Credit Suisse falling 6.4% and Deutsche Bank losing 2.6%. At 0937 GMT, the FTSEurofirst 300 index of top European shares was down 1.8% at 716.30 points, a level not seen in six years. The index, down for the ninth time in eleven sessions, has lost 14% so far this year.
“The banking sector is again at the centre of the negative newsflow. Full nationalisations are more and more conceivable,” said Jacques Henry, analyst at Louis Capital Markets in Paris.
On Monday, Wall Street sank to a 12-year low as news that the US government was set to increase its stake in Citigroup failed to offset fears that a number of embattled US banks could be nationalised.
Commodity-related stocks also retreated, hit by a drop in metal and oil prices on mounting economic worries. Xstrata was down 4.3%, Total down 1% and Repsol down 1.5%.
Shares of automakers lost ground. BMW, downgraded by Morgan Stanley to “underweight” from “overweight”, dropped 6.3% and Daimler, downgraded to “market perform” from “outperform” by Bernstein, was down 5.4%.
Around Europe, UK’s FTSE 100 index shed 0.5%, Germany’s DAX index fell 1.7%, and France’s CAC 40 lost 1.4%.
Adding to the grim picture, the Munich-based Ifo economic research institute said German corporate sentiment deteriorated slightly in February, as a worsening in firms’ assessment of current business conditions outweighed a rise in expectations.
Investors’ attention will turn to US consumer confidence data, expected today, as the market looks for clues on the extent of the damage from the recession on consumers’ morale. US home price data also due today will be in focus as well.