European markets ticked lower on Tuesday after a volatile day of trade, which saw investors dip their toes back into the market to buy defensive stocks.
After its biggest drop since 1987, the FTSE Eurofirst 300 ended the day 0.1 per cent lower at 1,003.51, erasing earlier gains following the US Federal Reserve’s creation of a facility to buy commercial paper in another bid to unfreeze credit markets.
In Germany, the Xetra Dax fell 1.1 per cent to 5,326.63 while France’s CAC 40 bucked the trend, rising 0.6 per cent to 3,732.22.
“The market is schizophrenic, but there is a move towards defensive stocks. People aren’t wanting to make any bets on risky assets and cyclical sectors yet,” said Edmund Shing, equities strategist at BNP Paribas. “Investors are taking a wait-and-see approach,” he added.
Banks continued to exert downward pressure on indices, however, with Irish banks falling in the wake of their British peers. Anglo Irish Bank plunged 24.6 per cent to €3 and Allied Irish Banks fell 14.1 per cent to €5.5. Deutsche Bank fell 8.9 per cent to €43.57 after market speculation of a capital increase, in spite of a denial by the bank. German peer Commerzbank fell 14.2 per cent to €10.21 and Austrian Bank Raiffeisen International lost 6.3 per cent to €42.40.
Belgium’s Dexia fell 12.5 per cent to €5.9, while in Scandinavia Swedbank fell 5.7 per cent to SKr86.75 and Danske Bank lost 9.2 per cent to DKr101.75.
Insurers also took a beating with the Dutch group Aegon 14.3 per cent lower at €4.21 and the Belgian financial services group KBC down 15 per cent to €48.14.
However, the picture was not uniformly negative, with stronger banks gaining ground after Monday’s sharp sell-off. Spain’s Santander climbed 2.9 per cent to €11.3 while peer Banesto rose 4.9 per cent to €10.12. France’s BNP Paribas edged up 1.4 per cent to €68.42 while Société Générale was flat at €60.54.
Oil companies also recovered lost ground after a bruising few days, with France’s Total up 3 per cent to €40.01 and Italy’s Eni rising 1.8 per cent to €16.91. Austria’s OMV lagged, dropping 5.6 per cent to €26.50.
Food and drink companies were star performers as investors rushed for cover. The Dutch brewer Heineken climbed 2.7 per cent to €26.88 and France’s Pernod Ricard rose 3.3 per cent to €52.41, while Denmark’s Carlsberg added 2.5 per cent to DKr309.50 and Belgium’s InBev gained 3.8 per cent to €40.24.
Unilever jumped 3.4 per cent to €19.95, Switzerland’s Nestlé added 1.5 per cent to SFr45.96 and France’s Danone gained 3.6 per cent to €46.62.
Utilities also benefited from the flight to safety with Germany’s E.ON up 3.5 per cent to €33.81 and domestic peer RWE rising 1.5 per cent to €66.50. Spain’s Gas Natural added 2.6 per cent to €25.51, while across the border in France GDF Suez rose 1.4 per cent to €33.90.
Software suppliers slid further after Germany’s SAP issued a profit warning on Monday. SAP was down 7.3 per cent to €26.73 and in France Cap Gemini fell 9.1 per cent to €26.37. Shares in German IT supplier Bechtle dropped 10.3 per cent to €11.10 after WestLB cut its price target from €20 to €13.5 saying the sharp slowdown in SAP’s business would also hit Bechtle.
Also in Germany, the carmaker Volkswagen ended the day 1.8 per cent lower at €287, after a rollercoaster ride which saw the stock surge by 55 per cent during trading as speculation that Porsche was about to raise its 35 per cent voting stake in the company to 50 per cent triggered a short squeeze on the stock.
