The European markets were under pressure at the start of the new trading week and finished solidly in the red. Concerns over Spain and Greece dragged the markets lower on Monday. Spain announced a ban on short sales of stocks for three months, while Italy banned short sales of stocks in the financial sector for one week. Financial stocks were hit hard on Monday, while energy stocks and miners were also in the red.
The Spanish economy contracted 0.4 percent quarter-on-quarter in the second quarter, Bank of Spain said in its quarterly estimates released Monday. This was sharper than the 0.3 percent contraction reported in the first quarter of 2012 as well as in the fourth quarter of 2011.
Spain's Valencia and Murcia regions have asked for financial aid, leading to speculation that a sovereign bailout may be necessary. The yield on 10-year Spanish government bonds climbed to 7.46 percent, touching a new euro-era record.
The German economy is likely to have expanded in the second quarter as a slight fall in industrial production was offset by construction and services growth, the Bundesbank said in its monthly report on Monday. "The economy should have grown at a moderate pace in the Spring," the central bank said. The outlook is subject to great uncertainty, it added.
Meanwhile, Greek Prime Minister Antonis Samaras warned that the country is facing economic hardship similar to what the U.S. faced in the 1930s.
The International Monetary Fund has signaled that it may not participate in further economic assistance for Greece, heightening the risk that the country may run out of cash by September, Germany's Der Spiegel reported Sunday citing unidentified EU officials.
The newspaper said that it is already clear to the troika, comprising the European Union, IMF and the European Central Bank, that the country will not reach the 120 percent deficit target. The troika will return to Athens for inspection on Tuesday.
In an interview to broadcaster ARD on Sunday, German Vice Chancellor Philipp Roesler said if Greece does not meet the obligations, then there can be no more payments. A Greek exit from the Eurozone has long ago lost its horror, he added.
The Euro Stoxx 50 index of eurozone bluechip stocks declined by 2.34 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 2.13 percent.
The DAX of Germany dropped by 3.18 percent and the CAC 40 of France fell by 2.89 percent. The FTSE 100 of the U.K. decreased by 2.09 percent and the SMI of Switzerland finished down by 1.66 percent.
In Frankfurt, Commerzbank dropped by 6.13 percent and Deutsche Bank lost 4.46 percent. Berenberg initiated Deutsche Bank with a "Sell" rating.
Bayer said the addition of cancer drug Tarceva to standard therapy Nexavar in a Phase III trial in patients with Hepatocellular carcinoma did not improve overall survival than Nexavar alone. The stock closed lower by 2.44 percent.
Fuchs Petrolub declined by 6.51 percent. Cheuvreux downgraded its rating on the stock to "Underperform" from "Outperform."
Hugo Boss fell by 1.51 percent. UBS initiated the stock with a "Buy" rating.
In Paris, BNP Paribas decreased by 5.47 percent, Societe Generale lost 4.58 percent and Credit Agricole dropped by 5.48 percent.
Danone dropped by 3.24 percent, after Societe Generale downgraded its rating on the stock to "Hold" from "Buy."
In London, African Barrick Gold fell by 16 percent. The firm reported a sharp decline in pre-tax profit for the first half of the year, reflecting the planned lower production and a 12 percent increase in gold price, amid higher costs.
Barclays dropped by 4.21 percent, Lloyds Banking Group fell by 2.17 percent and Royal Bank of Scotland lost 3.32 percent. HSBC finished down by 3.49 percent and Standard Chartered decreased by 2.55 percent.
XP Power rose by 7.89 percent. The critical power control components maker expects higher results in its second half, even though first-half results were hurt by softened demand amid weak market. The company also announced increased order take in the first half and a higher dividend.
Julius Baer increased by 0.81 percent in Zurich. The firm posted a higher profit for its first half.
Credit Suisse declined by 2.44 percent. Berenberg initiated the stock with a "Sell" rating.
Household finances in the United Kingdom deteriorated at the slowest pace in four months in July, data from a survey by Markit Economics showed Monday. The household finance index, which is designed to anticipate changing consumer behavior, came in at 37.5 in July, and continued to remain below the no-change 50 mark that separates growth from contraction. The latest reading was slightly higher than 37 recorded in June, indicating moderation in the rate of decline.
by RTT Staff Writer
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