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Business

European stocks steady but struggle to make gains

©

Latest update : 2009-03-03

After a small breeze of optimism at the opening, at midday European stocks were slightly in the red as they struggled to make some gains. Tokyo's Nikkei dropped by 1%, coming close to its lowest point since 1982.

AFP - Stock markets showed a new bout of nerves over the global crisis on Tuesday after warnings of deepening downturn in Europe and despite a rare profit rise from Standard Chartered in the banking sector.

Stocks, which had dropped alarmingly fast on Monday, steadied with slight gains in early trading in Europe but by midday were again on the retreat, driven by fallout from shock losses at US insurer AIG and British bank HSBC on Monday, and grim forecasts on the economic front.

There was no relief on the broader front of the financial and economic crises, whose global reach showed in updated and increased loss figures for international airlines.

In London, share prices showed a fall of 1.51 percent and in Paris the market was down by 0.49 percent. German stocks shed 0.30 percent in midday trade. In Tokyo, stocks on the Nikkei index ended with a loss of 0.69 percent.

The falls came after helter-skelter drops on Monday which took the Japanese market to the lowest point for 26 years, Wall Street 12 years and London six years.

European Union Monetary Affairs Commissioner Joaquin Almunia left open the possibility that the EU's executive commission might further downgrade its estimate of output for the bloc this year from shrinkage of 1.9 percent for the eurozone and 1.8 percent for the EU, estimated in January.

"Now I can say downside risks are bigger," he said.

Referring to the possibility that EU countries might have to increase special spending programmes to boost activity, he said that a proposal for EU governments to launch a joint bond issue was a "reasonable" idea but was "not politically viable today."

The Organisation for Economic Cooperation and Development (OECD), a policy group for the 30 leading industrialised countries, said meanwhile that its members had to press on with deep structural reforms.

Reforms of labour and product markets and of taxation were necessary, it said, to increase economic efficiency, raise growth potential and throw up a cushion against further crises.

"The OECD economies with the lowest productivity levels also have the highest administrative burdens on business," it said.

In France, Prime Minister Francois Fillon warned that the French economy would contract by 1.0-1.5 percent his year.

He also said that overspending on public finances could generate a public deficit of more than 5.0 percent of annual economic output this year, having earlier expected that its stimulus measures would push the deficit up to 3.2 percent for 2008 and 4.4 percent this year.

The new figure underlines a background of concern in many countries about how much debt they will be carrying after the crisis and how to cope with it.

"No stimulus plan will allow us to avoid the crisis," Fillon said on French radio. "What we do know is that the whole of 2009 will be a year of crisis."

Japan announced extra measures to help businesses to raise funds, saying it would provide five billion dollars to help keep credit flowing via the state-backed Japan Bank for International Cooperation.

Fallout from alarming results at US insurer AIG and British bank HSBC on Monday was still in the air. But Standard Chartered, known as the emerging markets bank, reported that net profit rose by a fifth last year to 3.41 billion dollars (2.69 billion euros).

The performance stands out amid a sea of red in the international banking sector and a horizon of black clouds, and chairman John Peace said: "To deliver record results in this exceptional environment is a great achievement."

The International Air Transport Association (IATA) said that airlines around the world lost 8.0 billion dollars (6.32 billion euros) last year, increasing the figure from 5.0 billion dollars estimated in December, in view of "large losses now being reported by Asian and European airlines."

And in Switzerland, the Geneva auto show opened against a background of rescues for US manufacturers General Motors and Chrysler, state aid for manufactuers in France and questions over the futures of Opel and Saab in Europe.

Another glimmer of good news emerged from Australia in the form of unexpectedly strong trade and retail data, and the central bank held the official cash interest rate at 3.25 percent, saying the economy had not contracted as much as those of many other countries.

This pushed up the euro in Asia to 1.2641 dollars from 1.2578 in New York.
 

Date created : 2009-03-03

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