Spain's credit rating cut helps drag indices lower

Eurostoxx 50: 2,909.73 (–25.38) Frankfurt DAX: 7,063.09 (–68.71) Paris CAC: 3,963.99 (–29.82)EUROPEAN STOCKS yesterday, slumped to their lowest close this year as Moody's Investors Service cut Spain's credit rating and export growth slowed in China, raising concern that the global economic recovery will falter.

“After horrific trade numbers out of China overnight, which show that the engine of world growth might be slowing down dramatically and another downgrade of a sovereign European nation, the ‘buy the dip’ attitude which has reigned over the last two years has started to look wobbly,” said Lex van Dam, London-based fund manager at Hampstead Capital LLP.

Spain’s IBEX 35 index sank 1.2 per cent as the nation’s rating was downgraded to Aa2 by Moody’s, which said that the banks will need as much as €50 billion to meet new capital requirements, more than double the €20 billion estimated by the government.

German Chancellor Angela Merkel has said she will do “whatever is needed to support the euro”, and promised that meetings scheduled for March will produce a “comprehensive” solution to the crisis.

Home Retail sank 5.9 per cent to 198.5p. The company projected that its “benchmark” pretax profit for the year ended on February 26th will have reached £255 million ($409.5 million) at most, as trading at its Argos catalogue stores was “more difficult and volatile than we anticipated”.

Commerzbank lost 2.6 per cent to €5.98. The lender will test the market’s appetite for a possible capital increase of as much as €7 billion in May or June to help repay government aid, Financial Times Deutschland reported.

BHP Billiton, the world’s biggest mining company, declined 3.5 per cent to 2,300p. Rio Tinto sank 3.8 per cent to 3,931.5p.

ARM Holdings slumped 9 per cent to 522.5p after JPMorgan Chase said the designer of chips that power Apple’s iPhone is most at risk if demand for tablet computers decreases.

Standard Life plunged 7.3 per cent to 226.9p, its largest slide since March 2009.

Delhaize rose 4.1 per cent to €59.74. The owner of the US Food Lion supermarkets said fourth-quarter net income advanced to €190 million, beating the €161 million average of nine analyst estimates. – (Bloomberg)