In the labyrinth of emotions

European stock markets hit historic lows

The European stock market continues to fall. The weakening eurozone economy reacts instantly and painfully to any negative news. One of them was a report from the insurer American International Group (AIG). According to analysts, a correction is possible in the near future, but downside risks remain.

Yesterday, key European indices fell to their lowest levels as stocks in the financial and energy sectors fell amid growing concerns about the region's economy. The pan-European FTSEurofirst 300 index lost more than 1% to its lowest historical level. Over the past year, the index fell by 45%, this year by 18%. The broad market Dow Jones Stoxx 600 index fell 1.4%, to its lowest since November 1996. The British FTSE 100 fell below 3,600 points for the first time since the Iraq war in 2003, to 3,581.66. Shares of banks HSBC, Credit Suisse, UniCredit and Barclays lost 2.4-6.3%, securities of insurers - 2.7-9% after the publication of AIG's quarterly report, which turned out to be the worst in US history. Eurobonds also fell in price as investors took profits after the previous successful session.

"The stock is somewhat oversold at the moment, which means there could be a significant rally in the near term," said Bob Doll, head of global investments at BlackRock. However, downside risks are still strong, he adds. “Until there is any movement on the macroeconomic front, markets will react painfully to news of losses in financial and industrial companies,” said Franz Wenzel, strategist at AXA Investment Managers.

The US stock market opened higher yesterday after a record decline the previous day, when the Dow Jones index fell 4.24% and crossed the psychologically important mark of 7,000 points for the first time since 1997. Yesterday at the beginning of the session, the Dow Jones rose by 80 points, the NASDAQ by 20. Investors froze in anticipation of speeches by US Treasury Secretary Timothy Geithner and Fed Chairman Ben Bernanke, from whom they expected details of the Barack Obama administration's program to stabilize the US financial sector.

The Russian stock market survived the unrest of Western markets, even managing to rise towards the end of trading: the RTS index gained 0.25%, to 540.74 points. “On Tuesday, the Russian stock market continued to get lost in the maze of emotions, trying to find lost values,” notes Promsvyazbank analyst Oleg Shagov. -- The RTS index remained virtually unchanged compared to the previous day's close. The growth leaders were Sberbank shares, the rise in prices of which was facilitated by the fact that Bank of America included them in the list of the most attractive banking shares in Eastern Europe.”

“Despite a significant decline in Western indices and a ten percent drop in oil prices, the Russian stock market is quite steadily resisting external negativity,” notes Ksenia Polyak, an analyst at Univer Investment Group. - Probably, part of the decline was already won back on Monday. The main driving factor for the domestic stock market remains the dynamics of oil prices and changes in the exchange rate of the national currency. As long as Brent oil is trading above $40 per barrel, and the ruble does not fall below the upper limit of the bi-currency corridor, in the absence of positive changes in external markets, the MICEX index will remain in the range of 600-650 points. In the event of a collapse in oil prices, the likelihood of updating the 2008 lows increases.”



Starting March 25, the US Federal Reserve will begin implementing a $1 trillion Term Asset-Backed-Securities Loan Facility (TALF) program designed to support consumer and business lending markets. Bloomberg reported this yesterday, citing a statement from the Fed. "TALF is designed to support the asset securitization market and provides financing to investors to encourage their purchase of AAA-rated debt backed by various assets. These markets have traditionally been a critical component of lending, but they have been largely closed since the deepening of the financial crisis. By unfreezing them, TALF will help banks meet the requests of consumers and small businesses to borrow money, which will stimulate economic growth," the Treasury Department and the Federal Reserve said in a statement. INTERFAX

Nikolay KOCHELYAGIN