Weaker carmakers and miners weigh on markets

EUROPE REPORT: Eurostoxx 50:2,927.42 (+3.66) Frankfurt DAX:7,024.27 (–58.49) Paris CAC:3,964.84 (–11.87)

EUROPEAN SHARES fell yesterday, with miners among the casualties, as investors worried that China will have to undertake further monetary tightening to combat inflation after strong growth numbers.

The pan-European FTSEurofirst 300 index of top shares fell 1.1 per cent 1,139.63 points, its lowest close since January 10th, after falling 1.3 per cent on Wednesday.

Chinese growth soared past forecasts and inflation slowed less than expected, heightening concerns the government will tighten monetary policy.

“The growth figure clearly surprised the market and rekindled fears over inflation and the possibility of further monetary tightening,” said Jeremy Batstone-Carr, strategist at Charles Stanley.

The news on China, the world’s biggest metals consumer, caused metals prices to fall. They were also pulled down by a stronger dollar.

Miners that fell included heavyweights Anglo American, BHP Billiton and Rio Tinto, down between 3.2 and 4.7 per cent.

Among energy companies, BP and BG fell 2.4 and 2.3 per cent respectively, as crude prices slipped.

Carmakers also featured among the worst performers, with German companies hit by worries that exports to China would ease.

BMW and Daimler fell 4.1 per cent and 3 per cent respectively. Italy’s Fiat dropped 3.8 per cent after JPMorgan cut its rating to “underweight” from “neutral”.

Upbeat news from the United States, the world’s biggest economy, did little to arrest the decline in equity markets.

British low-cost airline EasyJet slumped 16.2 per cent after saying first-half losses might double due to higher fuel prices and tough economic conditions, after it took a £31 million hit from the big freeze and strikes late last year.

Dexia rose 5 per cent after the Franco-Belgian banking and insurance group said it was finalising a funding deal with French mail operator and financial services provider La Poste.

“Markets have had a very good December and early January but the results from major US and European companies have been very much in line, leading to a period of profit-taking and a pause for breath,” a London-based trader said. – (Reuters)