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European markets slump on US retail sales slide

European markets slump on US retail sales slide

European stock markets plunged Wednesday amid renewed concerns about the financial well-being of the banking system and after some shocking U.S. retail sales data.
Investor sentiment was already shaken by concerns that some of the world's biggest banks will have to raise more capital to stay viable when the U.S. reported dismal consumer spending news for the crucial Christmas trading period.
The Commerce Department said U.S. retail sales plunged by far more than expected in December, as consumers reined in spending amid soaring unemployment and the credit crisis. It said retail sales dropped 2.7 percent last month, more than double the 1.2 percent decline expected.
After the data, the FTSE 100 index of leading British shares was down 187.09 points, or 4.3 percent, at 4,212.06 while Germany's DAX fell 161.78 points, or 3.5 percent, to 4,475.16. France's CAC-40 was 81.35 points, or 2.5 percent, lower at 3,116.54.
And on Wall Street, futures markets were predicting a sharply lower opening. Dow futures were 124 points, or 1.5 percent, lower at 8.284, while Standard & Poor's 500 futures fell 15.40 points, or 1.8 percent, to 853.20.
"The rally (in the markets) before Christmas and over the Christmas period was predicted on there being a recovery in the second half of the year but I think you can write this year off in terms of an economic recovery," said Neil Mackinnon, chief economist at ECU Group in London.
The economic and corporate news across the world has been dire in the early days of 2009, with trade on the slide and businesses slashing jobs.
The economic woes afflicting the world economy were highlighted Wednesday by the news that technology giant Nortel Networks Corp. has filed for bankruptcy protection amid sharply lower orders from phone company clients.
Meanwhile, companies around the world are struggling to make ends meet because cash-strapped banks continue to batten down the hatches to get their finances in order.
The financial health of the world's banks resurfaced as another major concern in markets Tuesday with the confirmation that Citigroup Inc. is to merge its Smith Barney brokerage into a joint venture with Morgan Stanley, relinquishing control in exchange for $2.7 billion in badly needed cash.
Royal Bank of Scotland PLC, which is now majority-owned by the British government, also said it was raising around 1.7 billion pounds ($2.5 billion) by selling its 4.3 percent stake in Bank of China.
In addition, analysts at Morgan Stanley said HSBC PLC, Britain's biggest bank by market capitalization, may have to raise between $20-30 billion and halve its dividend to plug a capital shortfall as earnings deteriorate by more than anticipated.
"While HSBC is winning market share we do not think this will be enough to offset the negative cyclical and structural trends," Morgan Stanley's analysts said.
HSBC's shares fell a massive 8.6 percent in the wake of the warning. Barclays PLC slumped 12 percent as it confirmed that it was culling 2,100 staff from its retail and commercial banking arm, while Royal Bank of Scotland fell 6.7 percent, despite its modest fundraising.
Deutsche Bank AG, Germany's biggest bank, reported a


Updated : 2021-05-08 02:44 GMT+08:00