European stocks fall amid fears over Japan

EUROPEAN STOCK markets retreated for a sixth consecutive day yesterday as worries about the nuclear crisis in Japan and unrest in the Middle East intensified, reversing an earlier rally.

European markets had opened higher after the Nikkei index bounced by 5.7 per cent over night. But comments from the European Union’s energy chief that Japan’s crippled Fukushima Dai-Ichi nuclear powerplant may provoke a “major disaster” unsettled markets, sending European and US shares sharply lower.

The Stoxx Europe 600 Index sank 1.6 per cent to 262.69 at close, representing a retreat of almost 10 per cent from this years high.

Bank stocks were hit particularly hard following the downgrading of Portugal’s sovereign debt. BNP Paribas and HSBC led banks lower, with BNP Paribas, Banco Santander, BBVA, Intesa SanPaolo and Société Générale falling between 2.6 and 5.4 per cent.

Auto shares had the second-biggest decline of all industry groups, sliding to the lowest level since October. Renault, France’s second-largest carmaker, fell 4.1 per cent to €36.01 and Germany’s BMW lost 2.2 per cent to €53.09.

In Dublin, the Iseq mirrored the trajectory of European markets, rallying in morning trade but falling off sharply in the afternoon, with the Iseq closing off 1.2 per cent at 2,713.

National benchmark indexes fell in 15 of the 18 western European markets. The UK’s FTSE 100 slid 1.7 per cent, while Frances CAC 40 tumbled 2.2 per cent and Germanys DAX retreated 2 per cent.

The VStoxx Index, which measures the cost of insuring against declines in the Euro Stoxx 50 Index, gained 14 per cent to 35.23, the highest level since July.

US stocks fell, sending the Standard and Poors 500 Index to the lowest level since December.

The S P 500 retreated 1.6 per cent to 1,262 at 1:33pm in New York, the lowest level on a closing basis since December 31st. The Dow Jones Industrial Average decreased 192 points, or 1.6 per cent, to 11,663. IBM, which makes up about 10 per cent of the 30-stock gauge, contributed 47 points to the index’s slump.

“The selling today is exacerbated by the nuclear situation, which makes it much more difficult to assess Japan,” said Christopher Sheldon, the Boston-based director of investment strategy at BNY Mellon Wealth Management, which oversees $166 billion globally.

“The market isn’t overreacting, we just don’t have enough information about whether it’s getting better or worse, and this move down fits within a normal correction.”

Meanwhile, crude oil prices pared gains as concern over Japan’s nuclear crisis overshadowed fighting in the oil-rich regions of the Middle East and northern Africa.

Futures retreated more than $1 following the comments by the EU energy commissioner. Oil rose as much as 2.5 per cent earlier as escalating violence in Bahrain raised concern that unrest will spill into Saudi Arabia, the world’s biggest crude-exporting country. – (Additional reporting: Bloomberg)