Eurostoxx 50: 2,852.11 (–31.73) Frankfurt DAX: 6,866.63 (–114.86) Paris CAC: 3,878.04 (–50.64):EUROPEAN SHARES hit a three-month closing low yesterday on worries about the economic impact of Japan's earthquake, though some analysts said equities had the potential to recover soon.
Roads, rail, power and ports have been crippled in Japan and it scrambled yesterday to avert a meltdown at a nuclear plant after an explosion at one reactor, with the cost of the disasters estimated at about $170 billion.
Don Fitzgerald, fund manager of European equities at Tocqueville Finance that manages $2.2 billion, said the market was witnessing a lot of sector rotation as short-term traders tried to make money from the tragic events in Japan.
“The disaster is another slight negative for 2011 economic growth. The reinsurance sector is under pressure as the quake could well wipe out a big portion of the sectors’ earnings this year.
“Anything related to the nuclear sector is under pressure as traders bet on tougher regulation. At the same time the renewable sector is in favour as the other side of the trade.”
Utilities fell the most, with the sector index down 2.1 per cent.
E.ON, which gets 41 per cent of its 19,000 megawatts of German power-generation capacity from nuclear, fell 5.3 per cent as Germany cast doubts about the future of its nuclear industry and Switzerland put on hold some approvals for nuclear plants.
However, shares in renewable energy companies were in demand after Japan’s problems. SolarWorld rose 13 per cent and Nordex gained 17.8 per cent, with volumes touching 634 per cent and 600 per cent of their 90-day daily average.
Some market experts said the limited decline by European equities following the disaster indicated that stocks had the potential to bounce back soon.
The Stoxx Europe 600 Insurance index fell 2.1 per cent, while reinsurers Munich Re and Swiss Re fell 3.4 per cent and 4.5 per cent respectively on estimates the quake could cost the industry nearly $35 billion.
Banks, however, gained as European policy-makers surprised at the weekend by agreeing to bolster a bailout fund for troubled euro zone countries. Greek banks jumped 8.7 per cent as investors welcomed the improved bailout terms. – (Reuters)
