European shares suffer worst loss for months
Bank stocks pressured by Obama plan
European shares fell yesterday to post their worst weekly fall in nearly three months, with financial stocks hit by US President Barack Obama's vague proposals to curb risk-taking at banks.
The FTSEurofirst 300 index of leading European shares closed down 1.1 per cent at 1,024.95 points, losing for the third consecutive session.
The index lost 2.6 per cent for the week, its worst weekly percentage fall in nearly three months and is down two per cent this year.
"It is all to do with the banks. The bottom line here is we have no idea how the banking plan is about to unfold, if indeed it does," said Peter Dixon, economist at Commerzbank.
"This is all at a time when markets are already fairly wobbly. The markets are always going to sell off when there is uncertainty. I think this is the story for today and will be for the next week."
Banks took the most points off the index after President Obama unveiled tough new proposals on Thursday to limit risk-taking in the banking sector and restrict some of the banks' most lucrative operations.
Credit Suisse, Barclays, UBS and Deutsche Bank fell 3.9 to 6.4 per cent.
Across Europe, the FTSE 100 index was down 0.6 per cent, Germany's DAX fell 0.9 per cent and France's CAC 40 was 1.1 per cent lower.
Energy stocks were under pressure as crude slipped 1.2 per cent. BP, Royal Dutch Shell and Total lost 0.8 to 1.7 per cent.
The VDAX-NEW volatility index, a measure of investor risk appetite or aversion, was up 2.8 per cent after earlier hitting a six-week high.
The higher the volatility index, which is based on sell and buy options on Frankfurt's top-30 stocks, the lower is investors' appetite for risky assets such as cyclical stocks, and equities in general.
On the upside, mining shares rebounded as metal prices recovered from earlier losses. Copper was up 1.4 per cent.
Anglo American, Eurasian Natural Resources Corporation and Xstrata gained 0.7 to 2.4 per cent.
Munich Re gained 0.3 per cent on market talk that US investor Warren Buffett might be buying shares.
In the United States, after a raft of mixed US results, global major General Electric topped Wall Street expectations in its fourth-quarter earnings.
"They are finally saying the environment is improving, and this is very important. Margins seem to be resilient, the order book is pretty good, and on a first look, there seems to be no bad surprises from GE Money," said David Thebault, head of quantitative sales trading, at Global Equities in Paris.