European stocks tumble amid weak global economy

September 11, 2008
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, LONDON, September 11 – European stock markets slumped on Thursday in the wake of heavy falls in Asia, pulled down by sharp losses for the banks as the global economic outlook turns darker still, traders said.

Fears near to home that the European economy is at risk of recession dampened sentiment and saw the euro strike a one-year low versus the dollar.

Traders said concerns over the banks, mired in losses due to the collapse of the US property loan market, were stoked further after ailing US investment bank Lehman Brothers failed to reassure investors over its future on Wednesday.

"Today\’s losses are basically coming from disappointment that Lehman Brothers failed to give the market a positive surprise," Daiwa Securities SMBC market analyst Yumi Nishimura told Dow Jones Newswires.

London\’s FTSE 100 index of leading shares was down 0.88 percent at 5,318.90 points in early afternoon trading. Frankfurt\’s DAX 30 slid 1.17 percent to 6,137.95 points and in Paris the CAC 40 shed 0.91 percent at 4,244.77 points.

The DJ Euro Stoxx 50 index of leading eurozone shares declined 1.01 percent to 3,209.21 points.

In foreign exchange deals, the euro slid below 1.39 dollars for the first time in a year and struck the lowest point versus the yen since September 2006 on heightened concerns about a weak European economy, traders said.

Oil prices tumbled to six-month low points below 98 dollars a barrel on Thursday as the dollar rallied and demand for energy decreased around the world due to the economic slowdown.

Asian stocks tumbled Thursday after Lehman Brothers hit investor sentiment by posting more hefty losses owing to the global financial crisis and credit crunch, dealers said.

The bourses in Hong Kong, mainland China, Taiwan and Singapore all slumped more than three percent. Japan, Asia\’s biggest bourse, and Australia each shed almost two percent.

US stocks had wobbled higher Wednesday as investors mulled Lehman\’s losses and plans to sell assets to shore up its finances.

Lehman said it would generate additional capital through the sale of a majority stake of around 55 percent in its investment management division.

In Europe on Thursday, banks reacted negatively to the development.

British bank Barclays dived 7.45 percent to 338.50 pence in London and peers HBOS and HSBC shed 4.50 and 1.72 percent respectively.

German and French banks were not immune to heavy falls as Deutsche Bank slid 2.26 percent to 59.62 euros in Frankfurt while in Paris, BNP Paribas lost 2.46 percent to 62.10 euros at the half-way mark.

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