Worst quarter for European share trading since 2008

EUROPEAN SHARES fell yesterday, posting their worst quarterly performance since 2008, wiping €895 billion off their value, and giving up Thursday’s gains following the German parliament’s decision to bolster the European Financial Stability Facility (EFSF).

Traders said worries global growth was stalling, with weak China manufacturing figures the latest to suggest a slowdown, weighed on markets. The torrid quarterly performance had also been hit by concerns about the euro zone sovereign debt crisis, with policymakers yet to come up with a plan to ease the situation.

The pan-European FTSEurofirst 300 index of top shares closed down 1.1 per cent at 923.41 points and has lost 16.9 per cent for the quarter, its worst since the end of 2008.

Bank stocks, which had started the week higher on hopes policymakers were preparing to leverage up the euro zone rescue fund, made a weekly gain of 8.5 percent. But the banking sector lost 28 per cent for the quarter, making it also one of the worst quarter performers and ended yesterday down 2.9 per cent as the optimism about an action plan faded towards the end of the week.

Official data showed Portugal’s public deficit eased only slightly to 8.8 per cent of gross domestic product by the end of June, but Lisbon still expects to reach its ambitious year-end deficit target of 5.9 per cent as agreed under its EU/IMF bailout.

“The numbers are not as promising as we hoped,” Prime Minister Pedro Passos Coelho was quoted as saying before the National Statistics Institute released the data.

The deficit for the 12 months to June eased from a gap of 9.3 per cent of GDP by the end of March and fell from a revised 9.8 per cent for all of 2010, the institute said.

But Mr Passos Coelho, whose government took over in June, told Lusa news agency that “with the data that we have today, with the measures that were announced in the framework of the latest troika (of lenders) evaluation, we plan to achieve the deficit target this year.”

Slovakia’s prime minister said her country’s parliament should approve new powers for the EFSF by October 14th, which would clear a major obstacle to a key part of the debt crisis strategy.

Objections by a junior governing party in a country of only five million people have cast uncertainty over activating plans to strengthen the fund.

So far, 14 of the euro zone’s 17 members have approved a wider mandate for the €440 billion EFSF so it can make emergency loans, rescue banks and help sovereigns under attack by markets.

Austria’s governing coalition of Social Democrats and conservatives secured parliamentary approval yesterday for beefing up the EFSF with just a simple majority.

But Austria’s opposition Greens want sweeping changes to international finance rules and domestic policy in return for giving their crucial support to the creation of the euro zone’s permanent bailout fund in 2013, a leading party member said. – (Reuters)