More ground lost for EU Indices on growth fears

More ground was lost for European equities on Tuesday as data continued to heighten fears that global economic growth was slowing down. Yesterday’s US ISM manufacturing data, which badly missed market expectations, convinced investors to throw caution to the wind and we have seen a continuation of that theme today.The FTSE 100 lost around 40 points by 11am on the day, weighed down by losses in the riskier asset sectors such as the oil and mining sectors. Similar weakness was seen in broader European Indices such as the DAX and CAC.

The issue surrounding the potential for a US credit ratings downgrade has not disappeared from investors’ minds but certainly there has been a bigger move to focus on economic data this week, particularly with non-farm payrolls out on Friday. After yesterday’s disappointing ISM manufacturing data from the US, investors will look to personal income and spending figures released at 1.30pm GMT.

We have seen bond yields continue to charge higher, such as Spanish and Italian bond yields hitting new 14-year highs, for those peripheral nations in the eurozone where confidence over their capacity to meet debt liabilities remains increasingly fragile.

From a sector perspective, it is the miners that continue to drag the FTSE 100 lower, losing another 2% in trading with Kazakhmys, Eurasian and Xstrata – all weighing. The latter of those three stocks, Xstrata, has dropped 2.5% despite more than doubling its interim dividend to $0.13 after reporting a 30% jump in profits. Today’s falls in Xstrata’s share price has tracked the broader mining sector lower.

Barclay’s gains on earnings
The banking sector has however continued to see support, led by Barclays after the UK bank reported a resilient set of earnings, with HSBC continuing to see demand after reporting earnings yesterday. The former reported a 33% drop in pre-tax profit to £2.6 billion, hurt by a drop in fixed income trading and an insurance miss-selling charge but did come in above the median of consensus expectations of £2.4 billion. The bank also reported that it was cutting 3,000 jobs as part of an effort to reduce costs by £1 billion in yearly costs by 2013, matching similar efforts announced by HSBC yesterday. This is a good set of earnings in the broader context of reduced consensus expectations having seen some of the US banks trading operations equally suffer. As such, Barclays shares have seen higher demand today, rallying 1.5% in the process.