Euro zone peripheral woes impact on banks

Eurostoxx 50: 2,080.10 (-27.17) Frankfurt DAX: 5,193.97 (-52.21) Paris CAC: 2,965.64 (-33.90)EUROPEAN SHARES hit their lowest close in more than two years yesterday, on worries that political discord was exacerbating the euro zone debt crisis and that major economies were headed for recession.

Banks exposed to the euro zone’s peripheral countries were among the worst performers.

The STOXX Europe 600 Banking Index fell 2.1 per cent to a 29-month low, with French banks BNP Paribas and Societe Generale down 5.2 and 6.5 per cent.

Among individual stocks, German drugmaker Bayer fell 7.5 per cent after US drug regulators questioned the effectiveness of an experimental stroke preventer from the German drugmaker and Johnson Johnson.

The pan-European FTSEurofirst 300 index of top shares fell 0.7 per cent to 903.87 points, its lowest close since July 2009. Volumes were high, 11 per cent above the indexs 90-day average.

The index is down more than 19 per cent in 2011, hit by the euro zone and US debt problems and data raising fears of recession across the Atlantic, such as Friday’s disappointing US non-farm payrolls report.

“We’re still in the eye of the storm,” said Richard Batty, strategist at Standard Life Investments, part of the Standard Life Group, which administers £196.8 billion pounds of assets. “Investors are concerned about the tier-two economies, such as Italy, and its ability to get its budget through parliament and come up with a fiscal consolidation plan to make its debt sustainable.”

However, Switzerland’s share benchmark climbed 4.4 per cent after the country’s central bank set an exchange rate cap on its soaring franc to stave off recession. The Swiss franc plunged against the euro. A range of Swiss stocks topped the gainers’ list.

Drugmaker Novartis rose 6.8 per cent, and Zurich Financial Services rose 3.9 per cent.

Europe’s drive to halt its debt crisis looked increasingly at risk yesterday amid doubts about the will in Italy and Greece to push through austerity measures demanded by their partners, and hardening opposition to further aid in Germany. Across Europe, Italy’s FTMIB fell 2 per cent, Portugals PSI fell 2.3 per cent and Germany’s DAX and France’s CAC 40 fell 1 and 1.1 per cent. – (Reuters)