European Market Reports

FTSE 100 Euronext Dax perf CAC 40

Debt Concerns Engulf European Markets  The major European averages are showing notable weakness in mid-day trading on Monday amid troubling news on the sovereign debt crisis front. An increase in the reserve requirement announced by the Chinese central bank, a downgrade of Irish banks by Moody's, the implication of Finnish election and speculation over Greek government seeking restructuring of its debts are having a negative impact on the markets. After opening modestly lower, stocks slid sharply in early trading before beginning a steady descent in the wake of economic fears. The Euro Stoxx 50 Index, which measures the performance of blue chip averages across the euro area, is receding 1.51 percent and the Stoxx Europe 50 Index, which also includes U.K. stocks, is down 1.11 percent. Meanwhile, the French CAC 40 Index is receding 1.42 percent compared to a 1.17 percent drop by the German DAX Index, a 0.95 percent decline by the U.K. FTSE 100 Index and a steeper 1.74 percent slump by the SSMI Average. In its continuing efforts to clamp down on credit growth, the People's Bank of China announced over the weekend that it is lifting the reserve requirement for banks by 50 basis points to a record 20.5 percent, effective April 21st. The announcement came after last week's inflation data that showed a 5.4 percent increase in the consumer price index for March. Another action by Moody's this week intensified debt worries. Close on the heels of its downgrade of Irish government bond rating last week, the rating agency today downgraded five Irish banks, citing the reduction in the level of systemic support embedded in the deposit ratings following the downgrade of the sovereign rating. Meanwhile, Greece denied reports that it has requested the International Monetary Fund and the European Union to consider restructuring its debt. Also spreading anxiety on debt woes was the election results from Finland, which has brought forth the possibility of the Social Democrats or the True Finns, factions opposed to EU bailout packages joining the center-right National Coalition Party to form a majority. The U.S. index futures are pointing to a sharply lower opening on Wall Street ahead of some key housing reports due to be released over the course of the week. Earlier in the global trading day, the major Asian markets closed mixed, with the Japanese, Indian,Hong Kong and South Korean markets retreating, while the Australian, Chinese and New Zealand markets ended in positive territory. Crude oil futures are down over $1 and are trading in the lower-$108-a-barrel level, adding to their previous week's nearly 3 percent decline. Gold futures are also losing ground amid the strengthening of the dollar on an increase in risk appetite. In Germany, Commerzbank is down over 5 percent, while Thyssenkrupp, Allianz, Metro,Deutsche Bank and Bayer are down over 2 percent each. On the other hand, Merck KgaA is rising over 1.40 percent. Thyssenkrupp was downgraded to "Neutral" by Goldman, according to dpa-afx. Deutsche Bank's weakness follows its announcement that it has ended negotiations on the sale of BHF-Bank. Hochtief, which announced the resignation of its CFO, effective October 18, 2011, is down over 2.80 percent Banks and insurers are leading the declines in Paris, with Axa, Societe Generale, Credit Agricoleand Natixis among the worst decliners. Veolia Environment and Pernod-Ricard andSTMicroelectronics are also sharply lower. In the U.K., resource and banking stocks are seeing notable weakness. Smith & Nephew and Resolution are the leading the declines. LSE is receding over 1.60 percent, while Kingfisher is up 1.05 percent, respectively. Merrill Lynch reinitiated the former, with a rating of "Neutral" and a 910 pence price target and raised the latter to "Buy", according to dpa-afx. Royal Philips is up a modest 0.20 percent after it reported a decline in its first quarter profit to 137 million euros from 200 million euros last year. The company also announced that it is ceding 70 percent control in its loss making TV business by forming a joint venture partnership with TVP Technology, a contract manufacturer in Hong Kong. The Dutch company will receive a 50 million-euro royalty payment annually from 2013. Deutsche Telekom and France Telekom-owned Orange Telecom announced a 50:50 joint venture to combine their procurement activities of customer equipment, network equipment, service platforms and IT infrastructure. The companies expect global savings of 400 million euros to 900 million euros after three years of implementation. France Telecom is down moderately in Paris Synthes is rising over 6 percent after it confirmed that it is in talks with Johnson & Johnson to be acquired by Johnson & Johnson (JNJ) Swiss confectioner Nestle is down about 4 percent after it announced that it is buying a 60 percent stake in Chinese food company Yinlu Foods Group. The companies did not divulge the terms of the deal.