Weaker banks weigh on European markets

Eurostoxx 50:2,957.78 (–21.28) Frankfurt DAX:7,059.01 (–8.76) Paris CAC:4,019.62 (–13.59)

EUROPEAN STOCKS dropped after Britain’s economy unexpectedly shrank in the fourth quarter, while banks tumbled as plans to strengthen Spanish lenders failed to ease concern about the region’s sovereign debt crisis.

European stocks last week posted their first weekly decline this year. “The sovereign debt crisis is an issue that will come and go through the whole year and will create volatility,” said Markus Wallner, a senior equity strategist at Commerzbank in Frankfurt.

“However, corporate profits are not made in Greece or Ireland and we have a very good quarterly earnings season with strong results. Some clients want to buy equities, but are waiting for lower prices to get into the market,” he said.

Spanish banks led declines in financial shares. Bankinter fell 5.2 per cent to €4.83, while Santander slid 3.1 per cent to €8.76. Banco de Sabadell tumbled 2.2 per cent to €3.54.

Spanish finance minister Elena Salgado, speaking in Madrid yes-terday, said the country’s lenders require no more than €20 billion ($27.2 billion) of extra capital, “all or part” of which they will be able to raise in financial markets.

The Spanish government will make the banks adopt a core capital ratio, a measure of financial strength, of at least 8 per cent, Ms Salgado said.

Lanxess, Germany’s biggest publicly traded speciality chemicals producer, slid 3.4 per cent to €51.29. The company said chief financial officer Matthias Zachert has expressed a wish to leave the company to take up a position elsewhere.

Ericsson, the world’s largest maker of wireless networks, rallied 2.5 per cent to 79 kronor. Fourth-quarter revenue rose 8 per cent to 62.8 billion kronor ($9.6 billion), exceeding the 59.5 billion-kronor average estimate of 36 analysts.

ASML, Europe’s biggest maker of semiconductor equipment, gained 4.2 per cent to €29.71.

Infineon Technologies rallied 4.6 per cent to €7.55.

Novo Nordisk climbed 1.4 per cent to 622 kroner as the world’s biggest maker of insulin was raised to “buy” from “neutral” at Goldman Sachs.

Renewable Energy advanced 1.4 per cent to 19.5 krone.

Fiat Industrial rose 1.9 per cent to €9.84, paring yesterday’s drop. – (Bloomberg)