London: European stocks slumped early on Thursday, dragged down by financials shares after Germany’s Deutsche Bank reported a huge loss and also by food groups after Unilever abandoned its targets due to economic crisis.
By 0925 GMT, the pan-European FTSEurofirst 300 index of top European shares was down 1.5% at 798.99 points after two days of rises.
“We are in a choppy environment at the moment ... Whether financials are through the worst, we are yet to see. Once we see the meat of the US stimulus package and the establishment of the bad bank, then we can start to crystalise ideas more firmly,” said Philip Lawlor, strategist at Nomura.
Banking stocks took the most points off the index. Deutsche Bank lost 3% after the group posted a €5.7 billion pretax loss for 2008 and predicted a bleak future for the global economy and its industry.
Spain’s biggest bank Santander fell 2.9% as its bad loans at the end of December rose to 2.04% of the total from 1.63% at the end of September.
Swiss Re slumped 13.8% after it wrote down 6 billion Swiss francs in toxic assets and posted a 2008 net loss of 1 billion francs.
Food producers weighed on the index. World’s second largest consumer products company Unilever dropped 5.4% after it abandoned all targets due to unpredictable economic conditions.
“What was stark about Unilever’s results was the refusal to give any guidance over the next few years. This is a testament to the environment companies are working in. It is a wake-up call to everyone that there is massive uncertainty,” said Lawlor.
Rival Nestle fell 2.5%.
British gas producer BG Group rose 8% after it said net profit, excluding one-off items, beat forecasts with a 25% jump in the fourth quarter compared with the same period of 2007, and gave a buoyant outlook for growth. Tullow Oil was up 0.7% as it announced its Kingfisher-3a well had struck oil.
Also bucking the downward trend was Swedish bank SEB, which rose 5.7% after it unveiled plans for a $1.8 billion rights issue.
Later in the session interest rate decisions from the European Central Bank (ECB) and the Bank of England (BoE) will provide a focus for investors.
ECB is expected to keep interest rates steady after four months of cuts, but financial markets will be looking for signs of further steps it may take to shore up the euro zone economy.
The BoE looks set to slash already record low interest rates by at least another 50 basis points in order to revive the British economy by getting consumers and companies spending again.
Across Europe, the FTSE 100 index was down 0.8%, Germany’s DAX was down 1.25%, and France’s CAC 40 was 1.5% lower.