Bank stocks slide after Portugal's downgrade

Eurostoxx 50: 2,721.24 (–62.96) Frankfurt DAX: 6,513.84 (–133.82) Paris CAC: 3,696.56 (–84.29):EUROPEAN SHARES extended a losing run to six days yesterday as concerns about the nuclear crisis in Japan and unrest in the Middle East intensified, and banks fell after Portugal's sovereign debt was downgraded.

The pan-European FTSEurofirst 300 index of top shares fell 1.6 per cent to 1,067.26 points, its lowest close in 3½ months. The index is down more than 10 per cent from its 2011 peak of a month ago.

Japan’s devastating earthquake and deepening nuclear crisis could result in losses of up to $200 billion for the world’s third-largest economy, but the global impact remains hard to gauge five days after a massive tsunami hit the northeast coast.

“We don’t know the extent to which the disruption in Japan is set to continue. The power outages are a key issue,” said Richard Batty, strategist at Standard Life Investments.

“With political tensions in the Middle East, and so many risky events, the market needs a higher risk premium,” he said.

The heavyweight banking sector was among the worst performers after Moody’s downgraded Portugal’s sovereign debt rating overnight.

BNP Paribas, Banco Santander, BBVA, Intesa SanPaolo and Société Générale fell between 2.6 and 5.4 per cent.

“We’re looking to the heads of government meeting next week to see how they solve the peripheral bonds crisis in Europe,” said Mr Batty.

Stocks on the rise were in a small minority but Statoil, up 2.9 per cent, was among the gainers as crude prices rose more than 2 per cent to above $110 a barrel.

Investor attention turned to the Middle East again as a crackdown on protesters in Bahrain resulted in the deaths of four people, according to hospital sources, and violent clashes erupted in Yemen.

Investor appetite for risky investments weakened further as the VDAX-NEW volatility index, one of Europe’s main barometers of anxiety, soared 13.3 per cent.

Across Europe, Britain’s FTSE 100, Germany’s DAX and France’s CAC 40 fell between 1.7 and 2.2 per cent.

Sonova slumped 22.8 per cent after the Swiss hearing aid maker slashed its profitability and sales outlook. – (Reuters)