In France, a dark day as stocks and spirits tumble

January 22, 2008

The US stock markets may have been closed Monday, but in France and the rest of Europe it was no holiday. France saw its worst stock-market showing in over four years on Monday. In Paris the Cac-40 fell 6.7%, while Frankfurt’s Dax dropped 5.4% and London’s FTSE 100 index fell 3.6% to 5685.2.

The sell-off came after a dismal day on Friday for U.S. stocks. That day marked the worst weekly performance on Wall Street in five years. Asian markets also fell sharply on Monday.

Overall in Europe, it was the biggest decline since September 11, 2001.

France, the UK, Germany and the rest of the world seem to be in agreement as to what precipitated this disastrous session. Fears about the US economy and its housing financing crisis were blamed for the sharp decline in markets in France and in the rest of Europe. Also blamed were doubts about President Bush’s proposed economic stimulus plan, regarded in France and elsewhere as too little too late.

Banks in France were hit particularly hard. Comments about “marking down assets” made by Bank of France Governor Christian Noyer to the International Herald Tribune didn’t help; they prompted the bank’s shares to drop by more than 8%. Societe Generale had lost about 6 billion euros ($8.8 billion) in market value since Thursday, with Credit Agricole also hit hard while BNP Paribas, France’s second-largest bank, sank 9.6 percent to 62.71 euros. Axa, France’s largest insurer tumbled 10 percent to 22.12 euros.
Financial institutions in France were not the only ones to suffer heavy losses. Club Med tumbled 2.85 euros, or 9.5 percent, to 27.05 euros, the biggest one-day decline since Oct. 1, 2002. The stock has fallen 37 percent this month.
Many stocks in France like Club Med were adversely affected by the news that Richelieu Finance, an independent French money manager, is seeking to team up with a partner after customer withdrawals caused a liquidity crunch.

France has now officially entered a bear market in a big way. The only people left smiling may be US visitors to France, who finally got a small break when the euro saw its first decline in months, falling to three-week low of $1.44.

Written by Web in France team - Filed Under Featured, News

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