Euro zone recession sparks stock sell-off

European stocks sagged yesterday after data showed the euro zone had slipped into recession. The Irish market underperformed, as key stocks endured a poor session, while Independent News and Media plummeted 41 per cent.

The euro zone economy has sunk into a recession for the second time in four years as governments imposed tougher budget cuts amid the worsening debt crisis, the EU’s statistics office said, prompting a modest sell-off across the region.

The economic data showed the French and German economies both managed 0.2 per cent growth in third quarter but the Dutch economy shrank by 1.1 per cent, much more sharply than expected.

DUBLIN

Independent News and Media’s stock fell more than 3 cents to 5 cents – representing a 41 per cent plummet in its share price. The losses wiped €19 million from the company’s stock market capitalisation, which is now €28 million. Some 6.6 million shares were traded.

INM’s share price is down 80 per cent in the year to date.

The Iseq fell 1.2 per cent, as Ryanair, the most traded stock of the day, declined 2.4 per cent, to €4.58, while its perennial acquisition target Aer Lingus fell 0.5 per cent, to €1.04.

Building materials group CRH, the largest stock on the index, declined 0.5 per cent, to €13.82, on a day when German peer Heidelberg fell 2.6 per cent on economic woes.

Paper and packaging group Smurfit Kappa was among the cyclical stocks to suffer, ending the session down 4.2 per cent , at €8.05, while insulation-maker Kingspan was another heavy faller, finishing down 4.7 per cent, at €7.26.

Food groups came off the worse for wear, with Glanbia slipping 1.9 per cent, to €8, and Kerry finishing the day down 1.3 per cent, at €38.30. There was a seller in CC, which fell 1.6 per cent, to €3.76.

Bank of Ireland edged up 2 per cent to 9 cents. Banks across Europe rallied on revived speculation that Spain might be ready to seek a bailout – a condition for activating a European Central Bank bond-buying programme.

LONDON

The FTSE 100 index of blue-chip shares fell to a fresh two-month low, as news that the euro zone had fallen back into recession saw share prices sink.

The index was down 44.26 points, or 0.8 per cent, at 5,677.75 at the close, finishing below 5,700 for the first time in two months and marking an end to range-bound trading that had persisted since early September.

Retailers retreated, with Kingfisher, owner of home improvement chain BQ, sliding 2.7 per cent, to 275.4 pence. Marks Spencer lost 2.1 per cent, to 370.6 pence and J Sainsbury, the UK’s third-largest supermarket company, fell 1.7 per cent, to 333 pence.

EUROPE

National benchmark indices declined in every western European market except Spain, where the Ibex index bucked the trend with a 0.3 per cent gain.

After the extent of recessionary woes in the Netherlands were revealed, shares in Franco-Dutch airline Air France-KLM fell 8.5 per cent and telecoms group KPN lost 5.3 per cent.

Swiss and German stocks – which have been strongly outperforming other European markets so far this year – were among the worst hit.

Swedish company Hennes and Mauritz fell 3 per cent after Europe’s second-largest clothing retailer said sales missed some estimates in October.

US

Stocks were little changed yesterday as the prospect of a drawn-out battle over impending tax and spending changes made investors wary of getting into the water, while retailer Wal-Mart tumbled 3.6 per cent after disappointing sales.

The worry among investors is that the US economy could contract again if no deal is reached in Washington to avoid the “fiscal cliff” – large, automatic budget cuts and tax hikes that begin to take effect in the new year. – ( Bloomberg / Reuters.)