February 1, 2008

Global equities markets hurt by US recession fears

LONDON (AFP) - European stock markets closed generally lower Thursday, after a mixed performance in Asia, with investors anxious about the financial health of US bond insurers as well as the broader US economy.

But the London FTSE 100 index managed to resist the downward pressure, bolstered by a positive start to trading on Wall Street, and finished 0.73 percent in positive territory at 5,879.80 points.

Elsewhere the CAC 40 fell 0.08 percent to 4,869.79 while in Frankfurt, where analysts said a rate cut Wednesday by the US Federal Reserve failed to reassure investors, the Dax shed 0.34 percent to end the day at 6,851.75.

The Euro Stoxx 50 index of leading eurozone issues rose 0.24 percent to 3,798.29.

Share prices in New York fell in early deals but later moved higher as investors concluded that the Fed rate cut Wednesday, lowering the benchmark rate by half a point to 3.0 percent, could ward off recession after all, dealers said.

The Dow Jones Industrial Average was up 0.54 percent in early afternoon trade at 12,510.62 while the tech-heavy Nasdaq had gained 0.51 percent to reach 2,361.03.

Earlier in Asia shares closed mixed as the Fed rate cut fuelled rallies in Japan and South Korea but failed to ignite major gains elsewhere as fears of a US recession intensified.

Analysts said sentiment in Paris was dampened, notably in the financial sector, by fears for US bond insurers.

"The financial sector is carrying everything along with it, now that concerns about bond insurers has resurfaced," said Frederic Rozier, an asset manager with Meeschaert.

Any deterioration in the financial condition of such insurers could depress the value of equities guaranteed by them.

Already one insurer, MBIA, has reported a loss of 2.3 billion dollars in the fourth quarter linked to the subprime crisis in the United States. In addition, the ratings agency Fitch has removed its top triple A rating from FGIC, the number three US bond insurer.

In Paris Societe Generale, staggered by massive losses it attributes to a rogue trader, gained 1.71 percent Thursday to close at 83.20 euros on reports that French rival BNP Paribas was contemplating a takeover offer.

"The prospect of a French-French alliance is clearly favored by the market and the range that has been circulating, 92 to 100 euros a share, appears credible," said Rozier.

Tire maker Michelin meanwhile fell 3.54 percent to 64.08 euros, hurt by pessimistic assessments from Goldman Sachs on the company itself and the wider sector.

In London Carphone Warehouse, one of Britain's leading providers of telecom services, shot up 8.06 percent to 328.50 pence on takeover talk.

Insurer Friends Provident plunged 10.57 percent to 138.80 pence after announcing a reorganisation in its activities that analysts said was a poor substitute for its failure to form an alliance with competitor Resolution.

In Frankfurt banks were among the principal losers amid continuing turbulence on financial markets.

Deutsche Bank fell 20.5 percent to 75.16 euros, Commerzbank lost 2.18 percent to close at 20.26 euros and Postbank gave up 0.61 percent to reach 55.57 euros.

Elsewhere in Europe there were declines of 0.39 percent to 441.33 in Amsterdam, 1.19 percent to 3,722.23 in Brussels, 0.02 percent to 7,670.44 on the Swiss Market Index, 0.09 percent to 13,229 in Madrid and 0.13 percent to 34,230 in Milan.

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