FTSE index drops 1%; Criteria CaixaCorp soars on merger news
By Barbara Kollmeyer, MarketWatch
LONDON (MarketWatch) — European stock markets eased off earlier lows to trade mixed Friday, with bank and automotive stocks trying to compensate for losses from miners that weighed down London.
The Stoxx Europe 600 index (ST:STOXX600 282.33, -0.55, -0.19%) slipped 0.2% to 282.25 in afternoon trading.
London’s FTSE 100 index (UK:UKX 5,904, -60.73, -1.02%) fell 1% to 5,905.39, posting one of the biggest declines among major benchmarks.
Europe followed on the heels of weakness in Asia, where Japanese stocks fell as investors got the first opportunity to react to the downgrade of the country’s sovereign debt by Standard & Poor’s.
Investors are awaiting U.S. data on fourth-quarter gross domestic product due at 8:30 a.m. Eastern time.
Koen De Leus, strategist at KBC Securities Bolero in Brussels, said European markets are due for a correction after the strong gains seen over the last couple of months.
He said there has also been a switch in what investors are buying in the last week.
“It’s really the dividend yields sectors that are pushing the market higher. There’s quite a bit of rotation going on, out of cyclical stocks and into dividend yields such as financials, utility stocks and healthcare,” he said.
De Leus said there is a “herd mentality,” with many fund managers buying stocks because they’re too nervous about missing out on the rally.
“The market is so overbought and overvalued...but no one wants to be left behind,” he said.
Financial stocks helped pull the France CAC 40 index (FR:PX1 4,068, +8.84, +0.22%) out of the red on Friday. The index rose 0.2% to 4,066.04, after spending much of the morning in the red.
La Caixa announces plans in Madrid
Financial stocks were a key topic in Spain on Friday. The IBEX 35 index (XX:IBEX 10,882, +53.70, +0.50%) rose 0.8% to 10,909.20, with shares of Criteria CaixaCorp SA (ES:CRI 5.19, +0.75, +16.78%) soaring 17% after the company’s savings arm La Caixa on Friday announced plans to transfer its banking business to subsidiary Criteria CaixaCorp and rename it CaixaBank.
CaixaBank will be the 10th biggest in the euro zone by market cap, according to a report in The Wall Street Journal.
The announcement comes days after the government said it would inject 20 billion euros into Spain’s troubled savings sector, and raise the core capital requirement for all up to a minimum of 8%.
