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European shares fall, political discord rekindles fears
(Reuters) / 8 May 2012
LONDON - European shares fell on Tuesday, with banks sliding on doubts over the impact of the Greek and French elections on euro zone efforts to resolve the debt crisis.
France’s CAC-40 and Greece’s were the worst performing indexes, falling 1.7 percent and 2.6 percent by 1116 GMT, after elections over the weekend left Athens unable to form a government and saw socialist Francois Hollande win the French presidency on a pledge to moderate Europe’s austerity drive.
Hollande’s focus on growth over fiscal consolidation was expected to put him at odds with German Chancellor Angela Merkel, reducing cohesion at the core of the crisis-struck euro zone and potentially leading to political uncertainty, traders and strategists said.
“I expect a lot of dithering from Hollande and Merkel. Eventually the market will get fed up, but it might take a month or so,” a London-based trader said.
“’Growth’ means unfunded borrowing (for) new infrastructure projects paid for by a pan-European pool.”
In Athens, mainstream conservatives failed to reach a deal on forming a coalition following Sunday’s election, leaving it to the Left Coalition party to try to form an administration, which would be opposed to the country’s EU/IMF bailout.
Failure to adhere to stringent terms set by the bailout agreement could result in international lenders suspending their payments to Greece, pushing the cash-strapped country towards insolvency and an exit from the euro zone.
Euro zone banks, the biggest owners of the region’s debt, fell 1.3 percent, with National Bank of Greece down 5.2 percent.
“The Greek situation clearly is a concern,” Gary Baker, head of European equity strategy at Bank of America Merrill Lynch said. “I don’t think anyone can see what the conclusion to that may look like both in term of forming a government and what that actually means.”
The pan-European FTSEurofirst 300 was down 0.6 percent to 1,028.92 points while the Euro STOXX 50 index shed 1 percent to 2,260.94 points, with trade coming to around 40 percent of the 90-day average.
KPN JUMPS ON MOVIL MOVE
Dutch telecoms group KPN topped the FTSEurofirst 300 as it rose 20 percent after America Movil, the telecoms giant controlled by Mexican tycoon Carlos Slim, said it planned to acquire up to 28 percent of it.
Upbeat corporate earnings were behind some of the other outperformers on Tuesday, confirming a trend which has seen 56 percent of European companies that reported first-quarter results so far meet or beat consensus estimates, according to Thomson Reuters Starmine data.
The world’s largest staffing company Adecco, up 0.7 percent, reported estimate-beating quarterlies but said Europe will remain challenging.
Belgian chemicals group Solvay SA rose 10 percent after saying it expects profits to recover in 2012 thanks to cost-cutting initiatives, which helped it offset weak markets for its plastics unit and beat the consensus estimate in the first quarter.
Shares in Norway’s Statoil rose 0.4 percent on Tuesday after the firm reported record quarterly earnings that were well above forecasts. It also stuck to its 2012 production guidance
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