Stocks slip back on negative outlook

STOCK MARKETS were gloomy and shaky on a day that brought multiple dark clouds to investors as political turmoil and weak manufacturing data overshadowed a string of corporate deals.

European stocks fell to a three-month low following the release of data showing a contraction in the euro zone’s manufacturing sector. Car makers, commodity stocks and banks led the sell-off, as preliminary figures also indicated that the Chinese manufacturing sector shrank in April.

Dutch prime minister Mark Rutte offered to resign after struggling to agree an austerity deal, while analysts speculated that a defeat for incumbent Nicolas Sarkozy in the second round of the French presidential elections in May could weaken co-operation between France and Germany in dealing with the debt crisis.

The busiest day in European takeovers since Glencore’s bid for Xstrata in February follows months of cash-hoarding by companies in response to the sovereign debt crisis.

Nestlé bought Pfizer’s infant-nutrition unit, Vodafone made a late bid for Cable and Wireless Worldwide and AstraZeneca snapped up Ardea Biosciences.

DUBLIN

DECLINES OF more than 3 per cent for Iseq heavyweights CRH and Ryanair sent the index sharply into reverse yesterday, with the overall market closing down 2.2 per cent, after a slight bounce at the end of the session helped offset a day of steadily weakening sentiment.

Building materials group CRH fell 3.2 per cent to €14.66, down 49 cents, while Ryanair also fell 3.2 per cent, shedding 14 cents to finish at €4.20. Aer Lingus also lost ground, closing down 1.5 per cent at 99 cents, with the two airlines falling in sympathy with a tumble for the London-listed International Consolidated Airlines Group (IAG).

Paper and packaging group Smurfit Kappa declined 2.6 per cent to €6.37, while food and beverage stocks Kerry, Glanbia, Origin, Aryzta and CC all went into reverse on day with few climbers.

LONDON

THE FTSE 100 slid 1.9 per cent as the negative mood took hold, sending commodity and banking stocks down.

Banks came under heavy pressure on worries about their exposure to the euro zone debt crisis ahead of the sector’s first-quarter results season. Barclays, the first of the British banks to report, was the worst off, down 4.2 per cent, while, among the miners, Vedanta Resources declined 5.7 per cent to 1,166 pence and Antofagasta slid 3.4 per cent to 1,138 pence.

IAG shed 5.4 per cent, as investors eyed integration issues after the owner of British Airways and Iberia completed its acquisition of Lufthansa’s UK airline, bmi, on Friday. The initial £172.5 million price was reduced after the German carrier failed to sell two of bmi’s units – its low-cost operator, bmibaby and bmi regional – before completion, as had been hoped.

IAG chief executive Willie Walsh said the company was in talks with potential buyers for the two subsidiaries but that a sale was far from certain.

Broadcaster BSkyB was one of only two gainers in the top flight, rising 0.7 per cent aided by its ongoing share buyback programme and ahead of third-quarter results due on May 2nd.

EUROPE

AS QUEEN Beatrix said she would consider Mark Rutte’s offer of his Cabinet’s resignation, the Dutch AEX dropped 2.6 per cent to the lowest level this year.

The Netherlands is not the only European country facing a possible change in government, with French president Nicolas Sarkozy becoming the first incumbent since 1958 not to win the first round of France’s election.

France’s CAC 40 lost 2.8 per cent, while Germany’s DAX sank almost 3.4 per cent and Sweden’s OMX plunged 4.6 per cent, its biggest drop since September.

Among car makers, Daimler lost 4.4 per cent to €39.43, BMW, which said it expects the pace of sales growth in China to ease, fell 4 per cent to €67.05 and Renault sank 4.9 per cent to €33.75.

Basic-resource companies also retreated, led by ArcelorMittal, the world’s largest steelmaker, which fell 5.6 per cent to €12.22.

ING, the largest Dutch financial-services company, fell 5.9 per cent to €5.27 as Dutch 10-year bonds fell, driving the yield difference to German bunds to a three-year high. Philips limited index losses, rallying 3 per cent to €14.77, after the world’s biggest light-bulb maker reported a return to profit.

US

STOCKS FELL in early trading New York, joining the global slump. Bank of America and Citigroup slipping more than 2 per cent as the cost of insuring against default on European sovereign debt soared. Monsanto and Newmont Mining fell at least 2.2 per cent as commodities retreated after manufacturing in Europe and China shrank. Wal-Mart fell 4.9 per cent amid a bribery investigation in Mexico, while Kellogg tumbled 5.4 per cent after cutting its earnings estimate. – (Additional reporting: Bloomberg/Reuters)