STOCK MARKETS tumbled around the globe yesterday as the Obama administration rejected recovery plans from beleaguered car makers General Motors (GM) and Chrysler, and warned that some banks will need more government aid.
The Iseq index lost almost 2 per cent due to the negative newsflow, with the banks suffering the severest losses. In percentage terms, AIB was the biggest loser, falling by more than 13 per cent.
However, one broker pointed out that “we weren’t alone”, as UK banks Barclays and Lloyds were both off by roughly 14 per cent on the day. Furthermore, “European financials as a sector were down nearly 8 per cent,” the broker said. “That’s a massive, massive move for financial stocks to be making on a broad-based level.”
In the US, Bank of America and Citigroup fell at least 8.8 per cent after US Treasury secretary Timothy Geithner said some banks would need “large amounts” of assistance.
General Motors plunged 21 per cent as US president Barack Obama said GM and Chrysler must survive without becoming “wards of the state”. He gave the companies deadlines to “fundamentally restructure” or lose government aid. The Dow Jones Stoxx 600 Index slipped 3.8 per cent to 170.45, the biggest drop since March 2nd.
“Today is a reminder that there is still a lot of negative news around,” said Stephen Docherty, Edinburgh-based head of global equities at Aberdeen Asset Management.
Goldman Sachs said the rally in European stocks since March 9th will lose steam, as gains were fuelled by low share prices and government stimulus packages rather than an improvement in the economy.
A gauge of executive and consumer sentiment in the euro region declined in March to the lowest level since the measure was first published in 1985, the European Commission said yesterday.
Banco Santander, Spain’s biggest lender, fell 7.5 per cent to €4.94 as Spain mounted its first major bank rescue in 16 years, taking over Caja Castilla-La Mancha after efforts to choreograph its purchase failed.
National benchmark indexes slipped in all of the 18 western European markets. Germany’s DAX lost 5.1 per cent, the most in almost four months, and France’s CAC 40 slid 4.3 per cent. The UK’s FTSE 100 dropped 3.5 per cent. Italy’s SP/MIB slumped 6.6 per cent as UniCredit SpA tumbled. – (Additional reporting, Bloomberg)
