European markets fall on economy fears - European commentary

(RTTNews) - The European markets fell for the second day on Thursday after European Central Bank President Jean-Claude Trichet said the global financial crisis may lead to an extended economic slump.

”The intensification and broadening of the financial turmoil is likely to dampen global and euro-area demand for a rather protracted period,” Trichet said after the ECB reduced its key lending rate by 0.5 percentage point to 3.25%, the second cut in less than a month. ”Price, cost and wage pressures should also moderate. I don’t exclude that we will decrease rates again.”

The Bank of England shocked the markets by slashing its key interest rate 1.5 percentage points to 3%, the largest official rate cut since 1981.

Policy makers in Switzerland and Denmark also reduced lending rates today.

The turmoil in financial markets and a plunge in consumer confidence has sparked a significant slowdown in global activity, the International Monetary Fund said in its updated World Economic Outlook, and added the global economy is expected to grow at a rate of 2.2% in 2009, compared to a 3.75% pace of growth projected for 2008 and a 5% rate in 2007.

In the U.S., the Labor Department said in its report that weekly jobless claims edged down to 481,000 from the previous week’s revised figure of 485,000. Economists had been expecting jobless claims to slip to 476,000 from the 479,000 originally reported for the week ended October 25.

The report also showed that continuing claims in the week ended October 25 rose to 3.843 million from the preceding week’s revised level of 3.721 million. With the increase, continuing claims rose to their highest level since February of 1983.

The 25-year high in continuing claims is likely to raise some concerns about the Labor Department’s monthly employment report due to be released on Friday. Economists expect the report to show that employment fell for the tenth consecutive month in October, with estimates calling for a decrease of 200,000 jobs. The unemployment rate is also expected to rise to 6.3% from 6.1% in September.

Crude for December delivery fell $4.36 to $60.94 a barrel on the New York Mercantile Exchange, by the time the European markets closed, as a growing number of economic reports pointed to a long and severe recession.

The FTSEurofirst 300 index of pan-European blue chips closed 5.78% lower at 898.13 points, while the narrower DJ Stoxx 50 index fell 5.56% to 2,241.50 points.

Around Europe, the U.K.’s FTSE 10 index fell 5.70% to 4,272.41, while France’s CAC 40 index slipped 6.38% to 3,387.25 and Germany’s DAX index dropped 6.84% to 4,813.57.

Heavily weighted oil stocks lost ground for the second day after crude oil prices dropped more than 6.7%. BP, Europe’s biggest oil company, fell 5.7%, while Royal/Dutch Shell, the second biggest, slipped 7.4% and Total, the third biggest, dipped 6.4%.

Similarly, mining stocks slumped after copper prices retreated. BHP Billiton, the world’s biggest miner, Anglo American, the second biggest, and Rio Tinto, the third biggest, lost 15% each.

Banking stocks also declined. HSBC, Europe’s largest bank, fell 4.1%, BNP Paribas, France’s CAC 40 index slipped 5% and Deutsche Bank, Germany’s biggest lender, dropped 12.8%.

Adidas, the world’s second largest sporting-goods maker, slid 9.6% after the company reported third quarter earnings that missed analysts’ estimate.

Axa, Europe’s second biggest insurer, dropped 9.2% after the company reported a 3.4% decline in third quarter revenue.

Man Group, the world’s largest publicly traded hedge-fund manager, tumbled 31% after the company reported a 25% drop in first-half profit.

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