Market buzz: Digesting European turmoil

Instability in Europe weighed on investors in Russia, with the RTS slumping 2.88% and the Micex plunging 2.58% into the red on Monday.

Another factor was the suspension of trading on Russia’s Micex-RTS exchange at midday GMT due to “a problem in displaying orders and deals in the main stock market section”, resumed only at 9.50 pm GMT.

Aleksey Rybakov from investment firm Trade Portal says “the markets are expected to recover on Tuesday in the absense of major macroeconomic statistics and with investors tired of the red”.

European stocks slumped to a three-month low on Monday, dragged by heavy losses of banks and resource firms, after the eurozone’s manufacturing output fell to its lowest level since June 2009 this month, while its services sector fell to a five-month low.

The slump was driven by poor performances in Germany and France, with manufacturing activity in Germany slowing to its lowest level in almost three years.

Political tension in the Netherlands, where failed budget talks resulted in the collapse of the Dutch government, also spooked investors, stoking fresh fears about Europe’s debt problems. French borrowing costs rose after President Nicolas Sarkozy’s poor performance against his rival Francois Hollande in the first round of the country’s presidential election, adding to investor worries in the eurozone. Germany’s DAX 30 index lost 3.36%, the CAC 40 index dropped 2.83%, and the FTSE 100 tumbled 1.9%.

US stocks also retreated on Monday with the Dow plunging 1.01%, the SP 500 losing 1.02% and the Nasdaq falling 1.17% as investors digested the news of political uncertainty in Europe and of the world’s biggest retailer Wal-Mart’s shares falling 4.7% amid concerns a bribery investigation in Mexico would undermine the firm’s overseas expansion. Investors in the western hemisphere will be watching US consumer confidence figures, new home sales, Canadian core retail sales as well as a speech by the Canadian central bank president on Tuesday.

After opening lower this morning, Asian markets are mixed so far as profit-taking after the previous day’s big losses was countered by concerns about the political and economic problems in Europe. Investors here are keeping an eye on central bank policy meetings in Washington and Tokyo this week, hoping for some fresh stimulus measures. Hong Kong shares are on the rebound, with the Hang Seng Index adding 0.5% in the midday session. Japan’s Nikkei Stock Average is in the red, inching lower 0.37%.

Leave a comment