European Stocks Plunge Amid Greek Referendum Concerns

Strategic Insights -

As Greece's government called a referendum on its latest bailout package, European stocks suffered their largest decline in five weeks. The Stoxx Europe 600 Index plummeted 3.5 percent, with national benchmark indexes dropping at least 2 percent in all 16 western European markets. Credit Suisse and Danske Bank led the sell-off in lenders, both sliding more than 6.5 percent after posting earnings that fell short of analysts' estimates. The VStoxx Index jumped 22 percent, a significant gain since Aug. 18, as investors became increasingly uncertain about the future of the eurozone.

Key Takeaways:

  • The Stoxx Europe 600 Index dropped 3.5 percent to 235.06 on October 26, the largest decline in five weeks.
  • National benchmark indexes tumbled at least 2 percent in all 16 western European markets, except Iceland.
  • Greece's ASE Index sank 6.9 percent, while France's CAC 40 Index dropped 5.4 percent and Italy's FTSE MIB Index plunged 6.8 percent.
  • Credit Suisse slumped 8.2 percent, the largest drop since August, after announcing 1,500 job cuts and a quarterly loss.
  • Danske Bank tumbled 6.8 percent, despite a 12 percent increase in third-quarter net income.
  • A gauge of European banks sank 6.2 percent, its largest decline since Aug. 18, despite the Institute of International Finance reaffirming lenders' commitment to the 50% writedown on Greek debt.
  • Mining companies declined with copper prices, as a report showed a drop in manufacturing in China.
  • The Purchasing Managers' Index fell to 50.4 in October, indicating contraction in the Chinese manufacturing sector.
  • Xstrata Plc declined 6.6 percent, Antofagasta Plc retreated 4.5 percent, and BHP Billiton Ltd. lost 2.7 percent.

Statistics:

  • The Stoxx Europe 600 Index dropped 3.5 percent to 235.06 on October 26.
  • National benchmark indexes tumbled at least 2 percent in all 16 western European markets, except Iceland.
  • Greece's ASE Index sank 6.9 percent.
  • Credit Suisse slumped 8.2 percent, a larger drop than any other European bank since Aug. 18.
  • Danske Bank's third-quarter net income rose 12 percent to 683 million Swiss francs ($768 million).
  • The Purchasing Managers' Index fell to 50.4 in October, from 51.2 in September.

Sources:

  • "European Stocks Fall Most in Five Weeks as Greece Calls Referendum" by Bloomberg News, October 26, 2011.
  • "Credit Suisse to Cut 1,500 Jobs, Posts Quarterly Loss" by Bloomberg News, October 26, 2011.
  • "Danske Bank to Cut 2,000 Jobs, Posts Unexpected Loss" by Bloomberg News, October 26, 2011.
  • "Greece's Papandreou Calls Referendum on Euro Zone Bailout" by Bloomberg News, October 26, 2011.