Stopped Growth of Stocks

Stock prices on European exchanges weakened on Tuesday, interrupting their growth recorded over the past two days, as investors are concerned about persistent corrections in the markets for the sixth consecutive week and worries related to the credit crisis are not subsiding. By noon, the London FTSE index weakened by 0.31 percent to 6,059 points. The Frankfurt DAX fell by 0.64 percent, reaching 7,359 points.

The largest losses were recorded by shares of financial institutions, due to renewed concerns about the situation in the credit markets and the crisis in the U.S. subprime mortgage market. Among the biggest losers were shares of the French bank BNP Paribas (1.4 percent), Swiss UBS (0.9 percent), and German Dexia (3 percent). “This is just a correction; it is not the end of the multi-year price growth in the market,” said Arthur van Slooten, a strategist at Societe Generale. “The recovery will take some time, but we believe that the factors supporting market growth since 2003 are still present,” he added.

The U.S. Federal Reserve cut its discount rate on Friday in an effort to calm market nerves. Central banks around the world have resorted to injecting liquidity into the markets to ease the grip of the credit crisis. “It will take some time for things to return to normal,” van Slooten believes. “As central banks have the liquidity situation under control and are ready to step in, this should provide a boost to confidence in the markets and reduce price fluctuations.”

Stock markets have sharply weakened since mid-July, as defaults on risky U.S. subprime mortgage loans have hit a number of financial institutions and raised concerns about potential consequences for credit markets and the global financial system. Insurers have been particularly affected, with AXA and Standard losing 1.3 percent in the value of their shares. The Nikkei index of the Tokyo Stock Exchange strengthened by more than one percent, to 15,901 points. (Hina)