ECB interest rate hike drives markets lower

Eurostoxx 50: 2,963.69 (–7.79) Frankfurt DAX: 7,178.78 (–36.33) Paris CAC: 4,028.30 (–19.86):EUROPEAN STOCKS fell for the first time in five days yesterday, after a 7.1-magnitude earthquake struck off the coast of Japan and as the European Central Bank raised interest rates for the first time in almost three years.

Banks limited the sell-off after Portugal sought a bailout from the European Union.

The Stoxx 600 declined 0.3 per cent to 280.78 at the close in London, erasing an earlier gain.

The gauge tumbled 5.7 per cent in the four days after Japan was hit by its biggest earthquake in at least a century on March 11th. The tremor crippled the Fukushima Daiichi nuclear plant.

“This just shows that investor sentiment is already very brittle because of the proximity to Fukushima,” said Jeremy Batstone-Carr, head of research at Charles Stanley in London.

“There is a lot of uncertainty out there so the initial reaction by the market was ‘here we go again’. It will take a little time to assess the impact from this,” he said.

European stocks erased an earlier advance after the earthquake hit 345km northeast of Tokyo, resulting in warnings of a possible tsunami.

The ECB raised its benchmark rate to 1.25 per cent from 1 per cent, as predicted by all 57 economists surveyed by Bloomberg News.

Hochtief plunged 7.9 per cent to €69.99, the most since October 2009.

Automakers were the worst-performing industry group in the Stoxx 600. BMW dropped 2.8 per cent to €59.13 after Morgan Stanley downgraded the shares to “underweight” from “overweight”.

GKN, a maker of systems that improve power and torque in cars, slid 4.5 per cent to 199.9p.

Halfords fell 5.1 per cent to 350p, the biggest drop since October. Gamesa Corporacion Tecnologica, a Spanish wind-turbine manufacturer, slid 4.5 per cent to €7.10.

Banks limited yesterday’s losses as Banco Espirito Santo, Portugal’s publicly traded lender, climbed 4.2 per cent to €2.99, the largest gain in three months.

Banco Comercial Portugues rose 4.1 per cent to €61.4. National Bank of Greece jumped 3.9 per cent to €6.39. Credit Suisse Group rose 2.1 per cent to 41.01 francs and UBS gained 1.4 per cent to 17.15 francs. – (Bloomberg)