European stocks fall

April 13, 2011 - 0:0

LONDON(WSJ) — European stocks were dragged lower Tuesday by basic resources as investors worried about the impact of the nuclear emergency in Japan, while a mixed German ZEW survey did little to lift confidence after falling for the second month in a row.

The Stoxx Europe 600 Index fell 1.2% to 277.69. London's FTSE 100 was 1% lower at 5994.83, falling below the 6000-mark. Germany's DAX lost 1%, to 7130.91 and Paris's CAC-40 was 1.2% lower at 3991.97.
""Developments in Japan and the Middle East-North Africa region and the elevation of oil prices were all cited as concerns by ZEW, with the possibility of 'second round' effects also highlighted more prominently than before,"" said Ken Wattret, chief euro-zone market economist at BNP Paribas. Surprisingly though, the ""current conditions"" index for April improved from an already strong level, to 87.1 from 85.4.
The Stoxx Europe 600 resources index dropped 3.3% to 604.55 as base metals prices declined. Among individual stocks in the sector, Kazakhmys and Eurasian Natural Resources were down 3.8%, Antofagasta was off 3.1%.
Meanwhile, the Dow Jones Industrial Average front month futures contract was down 0.4% at 122667.0 and S&P 500 front month futures contract was 0.5% lower at 1312.50. Concerns about the first-quarter earnings in the U.S. are weighing here, after Alcoa's overnight results fell short of expectations on revenues and margins.
Oil and gas stocks also racked up heavy losses, with the Stoxx Europe 600 Index for the sector down 2.3% at 347.64. Indeed, in a note Tuesday, Goldman Sachs put an end to its recommendation to buy crude oil, cotton and copper. The brokerage said although it believed that on a 12-month horizon the long crude, copper, cotton and platinum—or CCCP—basket still had upside potential, in the near term, risk-reward no longer favored being long. ""We are recommending closing the position for a 25% return versus a 28% target,"" the brokerage said.
On the corporate front, shares of Delta Lloyd N.V. fell 7.5% after Aviva said it intends to sell part of its shareholding in the company. Aviva reversed initial gains to trade lower, although the news was generally well received by analysts.
Elsewhere, Munich Re bucked the trend, rising 0.5% after Morgan Stanley upgraded the stock to overweight from equal weight, saying the market underestimates the positive effects of hardening rates and rising yields, from which the company benefits.
Earlier in Asia, stock markets closed lower Tuesday, as sentiment was subdued on global growth concerns, while renewed worries about Japan's nuclear crisis hurt Tokyo stocks. Japan's Nikkei Stock Average fell 1.7%, Australia's S&P/ASX 200 was down 1.5% and South Korea's Kospi Composite was off 1.6%.
Adding to the subdued mood, the International Monetary Fund said Monday that global economic growth should slow this year to 4.4% as new risks to its recovery surface. Crude oil prices took a hammering on worries slower global growth will temper demand.
In foreign exchanges, the euro gained ground, with strong demand out of Asia keeping the single currency supported. The mixed ZEW survey also failed to halt the euro's gains. By 1050 GMT, the euro was trading at $1.4469, from $1.4437 late Monday in New York.
Sterling dropped, however, after inflation data for March showed an annual rise of 4%, below expectations of a rise of 4.4%. ""These figures should help to sound the death knell for a May rate hike, especially given the current woes on the high street,"" said Philip Shaw, economist at Investec. ""This removal of interest rate support triggered a sell-off in the pound, but the move was relatively contained,"" he observed.
Sterling traded at $1.6262, from $1.6342. Elsewhere, the dollar was at ¥84.29 from ¥84.61.
Among commodities, spot gold was at $1463.60 per troy ounce, up $1.30 from New York, while May Nymex crude oil futures were down 9 cents at $109.83 a barrel.
In the bond markets, the June bund futures contract was up 0.31 at 120.21.
In U.S. economic news, the trade balance for February and import price index are both at 1230 GMT.