Paris: European equities closed higher on Monday, led by shares of German exporters, but a downgrade of Spain’s credit rating weighed on Madrid-listed stocks, with Banco Santander and BBVA losing ground.
BP shares traded in Frankfurt tumbled 6.8% after the company’s latest attempt to plug an oil leak in the Gulf of Mexico failed and US government and BP officials warned the leak from the blown-out oil well may not be stopped until August.
BP shares -- which did not trade in London due to a public holiday -- have lost nearly a quarter of their value since the oil spill started six weeks ago.
The FTSEurofirst 300 index of top European shares closed the holiday-thin session up 0.3% at 1,001.11 points, capping its worst month since February 2009.
The index shed 5.8% in May, hit by intensifying fears that a sovereign debt crisis in the euro zone could derail the global economic recovery.
“The fact that European stocks are not selling off today on the downgrade of Spain is a positive signal. It means that the sovereign debt risks have now been priced in,” said Pierre Sabatier, president and head of strategy at PrimeView in Paris.
Fitch Ratings downgraded Spain’s debt rating by one notch to AA-plus with a stable outlook after European markets closed on Friday.
Madrid’s benchmark IBEX lost 0.7% on Monday, with Santander falling 0.9% and BBVA dropping 1.2%.
French banks, which have a significant exposure to southern Europe, featured among the biggest losers, with both Societe Generale and BNP Paribas down 1.4 percent.
Not as sanguine
Spain’s downgrade “was a following up of what we knew already. It was not as sanguine as S&P was,” said Valerie Plagnol, chief strategist at CM-CIC Securities in Paris. “The market is still wary of the situation and the euro remains under pressure.”
Standard & Poor’s downgraded Spain’s ratings by one notch to AA with a negative outlook on 28 April.
Across Europe, Germany’s DAX gained 0.3% and France’s CAC 40 lost 0.2%.
Among the big winners of the day, Infineon rose 1.9% and Siemens added 0.8%.
Volumes were thin as UK and US markets remained closed for holidays. Volume on the CAC 40 represented only 40 percent of the index’s 90-day daily average and on the DAX volume was only 32% of the average.
The FTSEurofirst 300 benchmark index is still down 10% since mid-April, when fears started to intensify that the Greek debt crisis could spread to other euro zone countries and derail the global economic recovery.
Over the weekend, France admitted that keeping its top-notch credit rating would be a stretch without some tough budget decisions, following German hints that Berlin may resort to raising taxes to help bring down its deficit.
Investors were also cautious after Israeli marines stormed a Turkish aid ship bound for Gaza on Monday and 10 pro-Palestinian activists were killed, sparking a diplomatic crisis.
Turkish shares fell 1.5%.
The sharp six-week sell-off in shares triggered by the euro zone debt crisis has pulled European stock valuations to their lowest level in 10 months, but PrimeView’s Sabatier warned it doesn’t necessarily mean stocks are trading at bargain levels.
“The current valuation levels reflect investors’ concerns about the sustainability of the strong profit margins recently posted by companies,” Sabatier said. “People fear that with all the fiscal austerity measures and tighter regulation, the margins will start eroding soon.”