DSG International loss narrows; Saint Gobain downgraded at Goldman Sachs
By Sarah Turner, MarketWatch
LONDON (MarketWatch) -- European shares fell sharply on Thursday, with banks leading a broad retreat for the region, as investors took some of the year's profits off the table amid uncertainty about exposure to Dubai debt.
The London Stock Exchange halted share trading Thursday morning, citing technical problems. A spokesman for the exchange operator said the problem is affecting only its U.K. market. In a notice to market participants, the LSE said it will give a 30-minute notice period before trading resumes.
The pan-European Stoxx 600 index (ST:SXXP 243.11, -4.85, -1.96%) lost 1.9% to 243.22, paring year-to-date gains to roughly 23%. This is the second session of losses for the index in four sessions.
Although every sector traded in the red on Thursday, banks were the worst performers, down 3.4%.
Of individual lenders, Deutsche Bank (DE:DBK 47.69, -2.03, -4.08%) (DB 75.22, +0.54, +0.72%) shares fell 4.2% in Frankfurt, ING Group (NL:INGA 9.12, -0.50, -5.17%) (ING 12.28, -0.24, -1.92%) shares fell 5.3% in Amsterdam and BNP Paribas (FR:BNP 54.60, -2.12, -3.74%) shares dropped 3.7% in Paris.
Greek bank stocks were lower again, with Piraeus Bank down 5.1%. The slide for Greek banks has lately occurred hand-in-hand with a spike in Greek government-bond yields amid rising concerns over the country's mounting deficit.
Worries about government finances weren't helped after Dubai World, the state-owned conglomerate, said Wednesday it was considering a six-month standstill on its debt.
David Page, economist at Investec Securities said: "It adds to the mood of nervousness and uncertainty."
Possible individual exposure for European banks was also a factor. "The Middle East region is unlikely to be more than 1% to 2% of banks' exposures and Dubai would be a small portion of this: we believe European banks' we cover could have exposure of 13 billion euros," said analysts at Credit Suisse.
"A 50% loss on the exposure would be equivalent to a 5% increase in provisions in 2010, or a hit of about 5 billion euros after tax," they added.
On a regional level, the French CAC-40 index (FR:PX1 3,737, -72.34, -1.90%) fell 2% to 3,734.83, the German DAX index (DX:DAX 5,699, -104.09, -1.79%) lost 1.9% to 5,693.45.
Asian shares were lower in part as the yen hit a multiyear high against the dollar, weighing on exporters. U.S. stock markets are closed on Thursday for the Thanksgiving holiday. Read Asia Markets story.
"With U.S. markets shut, we have to be mindful of light trading volumes exacerbating two-way flows," said Kenneth Broux, economist at Lloyds TSB Corporate Markets.
Of a handful of firms reporting on Thursday, shares of electrical-products retailer DSG International (UK:DSGI 37.40, +0.82, +2.25%) rose 2.2% after it narrowed its first-half net loss.
The loss attributable to shareholders shrank to 17.8 million pounds ($29.6 million) from 40.3 million pounds in the year-earlier period. Revenue fell to 3.3 billion pounds from 3.4 billion pounds.
Comparable sales fell 4% in the first half ended Oct. 17 but the trend improved toward the end of the period, with sales rising 1% in the final eight weeks.
Broker downgrades were also playing a part in Thursday's move, with shares of building-materials firm Saint Gobain (FR:SGO 36.47, -1.80, -4.69%) down 4.8% in Paris after it was cut to sell from neutral at Goldman Sachs.
Legal & General (UK:LGEN 80.85, -4.75, -5.60%) shares fell 4.6%. The insurance firm was downgraded to sell from hold at Citigroup.
The broker said "our key themes of growth and restructuring drive our recommendations. We prefer relative winners from the crisis and see limited further potential for recovery plays."
