London: European stock markets fell on Monday on concerns over potential broader implications for banks of the US fraud case against investment bank Goldman Sachs and the impact on airlines from the Iceland volcano.
In Asia, markets fell after China announced measures to cool housing prices.
Tight policy: Shanghai fell nearly 5% on Monday after Beijing announced measures to cool housing prices. Reuters
London’s FTSE 100 and France’s CAC-40 were both down 0.7%, while Germany’s DAX was off 0.48% by 12:45pm London time.
Oil futures extended a decline that began in electronic trade in Asia, falling by over $2 per barrel, while the dollar weakened against the euro, yen and the British pound.
Driving the drop in Europe and the US was concerns about a possible widening of the problems confronting Goldman Sachs. On Sunday, British Prime Minister Gordon Brown called for authorities there to investigate the investment bank, accusing it of “moral bankruptcy.”
Also weighing on markets were worries that the flight cancellations imposed because of the Iceland volcanic ash cloud would pummel the airline industry.
The cancellations entered their fifth day and were costing airlines about $200 million per day.
The stock declines in Europe were moderate in relation to Asian equity markets’ slide—a drop that saw China’s Shanghai market plummet nearly 5%.
Fuelling the slide, in part, was an announcement by the government over the weekend of more moves to level off housing prices, including possible restrictions on lending to buyers who have already have two or more homes. Real estate prices have risen for months despite government measures and promises to curb speculative property investments.
Shanghai’s key index plunged 150 points, or 4.8%, to 2,980.30—its biggest fall in eight months.
“This time, it seems that the government determination to cool home prices is bigger than before,” said Mao Nan, a strategist for Oriental Securities in Shanghai.
Japan’s Nikkei 225 stock average fell 1.7% to 10,908.77 and Hong Kong’s Hang Seng index dropped 2.1% to 21,405.17. South Korea’s Kospi retreated 1.7%. In Mumbai, the bellwether Sensex fell 190 points to a one-month low of 17,400.68.
Financial names came under intense selling pressure in Asia, with Japanese banking shares among the heaviest casualties.
Oil futures continued to slide, with the benchmark crude for May delivery down $2.29 per barrel at $80.95 per barrel in electronic trade on the New York Mercantile Exchange.