EU shares, euro down

Venezuela Star Thursday 5th January, 2012

LONDON - European stocks and the euro dipped Thursday amid fresh concerns that Europe will struggle to contain its debt crisis in the wake of question mark over the health of banks in the 17-nation bloc.

The euro dropped to its lowest rate against the dollar in 16 months. The UK's share index also fell in midday trade and financials and miners were among the top fallers.

The euro was trading at 1.2831 against the dollar and was at an 11-year low versus the yen.

The markets plummeted after a rise in France's cost of borrowing and a Spanish minister suggesting its banks may face a higher bad loan bill.

France sold eight billion euros of 10-year bonds at an auction, paying an interest rate of 3.29 percent. This is up from 3.18 percent at the last sale in December.

There were concerns that the euro zone's second-largest economy could lose its AAA credit rating despite the slight rise and solid demand in borrowing costs of the country. This is likely to make it more expensive to borrow.

In December, France saw its AAA credit rating placed on negative outlook by rating agency Fitch.

Meanwhile, amid worries over their earnings outlook in the wake of their exposure to Europe's debt crisis, Britain-listed banks were lower.

Other financials with exposure to Europe's debt crisis and the resulting market uncertainty fell too.

Stefan Angele of Swiss Global Asset Management, which manages about 75.7 billion swiss francs assets portfolio, was of the view that the focus should be on the public debt crisis in the industrialized world, particularly so in Europe as it currently poses the biggest threat to the global financial system.

"Our baseline scenario of weaker economic growth but no recession only holds if we see no major shock in the financial sector," it said.