Blue Monday in Europe as shares and production slump

More bad news on the Continent as shares plummet and eurozone industrial production figures put the bloc deeper into recession.

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013
It’s been a monster of a weekend for the eurozone: the economic equivalent of waking up with no wallet and a black eye. Between the ongoing political strife in Greece as the Coalition falters, China’s monetary policy tweaks, and Spain’s financial woes, shares have gone into freefall. Add to that the latest industrial output figures, showing a 0.3% contraction and the eurozone is going to wish it stayed in bed this morning.

Bank shares are worst hit, with Spain and France nursing heavy losses. French bank BNP Paribas is 3.4% down, while Societe Generale lost 3.3% and Credit Agricole fell 3.4%. In Spain, Banco Santander and Bankia have lost 3.4% and 4.4% of their share prices, sending Madrid's Ibex index down 2.8%. Germany's Dax has dropped 2%, and the Cac has fallen 2.3%. The UK hasn’t escaped unscathed either: the FTSE 100 is 1.7% down on its Friday close.

Political skirmishes rage on in Greece, after Greek President Karolos Papoulias failed to form a Coalition government on Sunday.  A major left-wing contingent has refused to agree to austerity measures, sending Greece further down the path to default. As a result, the euro flirted with a four-month low, dipping just below $1.29.

But investors are even more worried about recent developments over in China, where bank reserve ratios have been slashed to try and stimulate the economy. Risk-averse traders will be keeping a gimlet eye on that one. Unsurprisingly, German Bund futures have been hot property this morning, reaching a record high of 143.17.

Rubbing salt into these wounds, new eurozone industrial production data shows that the bloc has fallen yet deeper into recession, with a 0.3% drop in March. This means that production has declined 0.5% across the first quarter of 2012.

And looking at the April PMI data for the eurozone, the picture gets no prettier. An increased rate of contraction is forecast with the production of durable goods slumping 6.7% on a year ago. Greece and Spain are the worst performers, with output slumping 8.5% and 7.5% respectively on a year ago. Falls of 5.8% and 5.7% have also been reported for in Italy and Portugal.

Greek President Papoulias has called for another meeting today to try and establish some government unity and keep Greece in the single currency. The markets will wait with baited breath. Without some resolution in Athens, the financial turmoil will keep on wiping billions off global share prices…

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