Weaker banks drive down European indices

Eurostoxx 50: 2,107.27 (–113.45) Frankfurt DAX: 5,246.18 (–292.15) Paris CAC: 2,999.54 (–148.99):EUROPEAN STOCKS tumbled yesterday, with the Stoxx Europe 600 Index posting its biggest two-day drop since March 2009, as investors speculated that support for bailing out Europe's indebted nations may fade.

“Europe is being hammered on the debt crisis,” said Henrik Drusebjerg, senior strategist at Nordea Bank in Copenhagen.

“It’s Merkel getting slapped at the regional election yesterday and it’s the Finns demanding collateral for the money they’re wiring to Greece,” he said.

The benchmark Stoxx 600 plunged 2.4 per cent on September 2nd, after a worse than forecast US jobs report added to concern that America’s economic recovery is stalling. The gauge lost 10 per cent last month amid concern that global economic growth is slowing as Europe’s sovereign-debt crisis spreads.

Merkel’s party on Sunday suffered its fifth election loss this year after the chancellor failed to sway voters in her home state with a campaign based on her handling of the euro area’s debt crisis.

The Social Democrats, the main opposition party nationally, took 35.7 per cent to win Sunday’s election in Mecklenburg-Western Pomerania, while Merkel’s Christian Democratic Union had 23.1 per cent, its worst result since voting began in 1990 after reunification that year between West Germany and the former communist East Germany.

Deutsche Bank tumbled 8.9 per cent to €23.72, Credit Suisse plunged 8.1 per cent to 19.99 Swiss francs and Royal Bank of Scotland declined 12 per cent to 21.78p after the lenders were among 17 to be sued by the US to recoup money spent on mortgage-backed securities bought by Fannie Mae and Freddie Mac.

HSBC slid 3.8 per cent to 504.5p, Barclays lost 6.7 per cent to 154.15p and Société Générale sank 8.6 per cent to €20.25.

France’s Arkema retreated 8.2 per cent to €46.66, Germany’s Wacker Chemie dropped 7.3 per cent to €85.72 and Amsterdam-based Akzo Nobel fell 6.7 per cent to 32.16.

Berkeley Holdings surged 4.8 per cent to 1,236p. The UK’s largest home builder by market value said it may reach a goal of doubling pre-tax profit two years earlier than it had planned as sales improve. – (Bloomberg)