Europe shares in biggest monthly loss since Feb ‘09

EUROPEAN equities closed higher yesterday, led by shares of German exporters, but a downgrade of Spain’s credit rating weighed on Madrid-listed stocks, with Banco Santander and BBVA losing ground.

The FTSEurofirst 300 index of top European shares unofficially closed the holiday-thin session up 0.3 per cent, at 1,000.55 points, capping off its worst month since February 2009. The index shed 5.8 per cent in May, hit by intensifying fears that a sovereign debt crisis in the Eurozone could derail the global economic recovery.

“The fact that European stocks are not selling off today on the downgrade of Spain is a positive signal. It means that the sovereign debt risks have now been priced in,” said Pierre Sabatier, president and head of strategy at PrimeView in Paris.

Fitch Ratings downgraded Spain’s debt rating by one notch to AA-plus with a stable outlook after European markets closed on Friday.

Madrid’s benchmark IBEX lost 0.8 per cent yesterday, with Santander falling 0.9 per cent and BBVA dropping 1.2 per cent.

On Friday European shares had closed lower, following two consecutive days of gains, with BP down over uncertainty as to whether it had managed to plug its Gulf oil well and other energy stocks tracking a fall in crude prices.

Although the pan-European FTSEurofirst 300 closed down 0.3 per cent at 997.70 points, it recorded a gain of 2.9 per cent for the week as bargin hunters snapped up shares after prices fell to their lowest levels in about 10 months.

Investor sentiment also remained fragile as US data showed consumer spending was unexpectedly flat last month and growth in business activity in the US Midwest slowed.

Energy stocks were under pressure as crude prices fell back after the US economic data. Total and Statoil slipped 0.5 per cent and 0.8 per cent, respectively.

Banks, which have been hit hard by concerns over Europe’s sovereign debt crisis, retreated from earlier session gains.