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EU Stocks Climb Today but End Year Down

By:
Barry Norman
Updated: Jan 1, 2011, 00:00 UTC

In a surprise ending of the trading year, European market in all EU indexes rose today (except Iceland). The Stoxx Europe 600 index climbed 0.9% to close

EU Stocks Climb Today but End Year Down

In a surprise ending of the trading year, European market in all EU indexes rose today (except Iceland).

The Stoxx Europe 600 index climbed 0.9% to close the day at 244.57. Most European indexes finished the year deep in the red, falling 11.3% over the course of 2011.

The Stoxx 600 surged 5.6 percent from the start of the year to its high on Feb. 17 before dropping over concerns about the debt crisis. The index sank 26 percent from that high to its low on Sept. 22, entering a bear market. The index had its worst third quarter since 2002, dropping 17 percent, as U.S. leaders wrangled over deficit cuts and European policy makers struggled to contain the debt crisis.

Germany’s DAX 30 index closed for the holiday 0.8% up at 5,898.35, with a yearly loss of 14.7%. The French CAC 40 index increased 1% to close at 3,159.81, declining at 17% for the year.

London’s FTSE 100 outperformed its European neighbors, but still concluded the year with a 5.6% decline. Closing early for the holiday, the index showed a gain of 0.1% at 5,572.28.

Banks had the biggest this year, sliding 32 percent, on increased worried that the fiscal crisis will force at least one nation to default on its debt. Health-care and food stocks advanced as investors sought companies whose earnings are less tied to economic growth. More and more money moved out of the EU and to America and even companies in America, that were depended on sales or profit from the EU saw investors pulling back.

The decline in European equities compares with a 17 percent drop in the MSCI Asia Pacific Index and a 0.3 percent gain in the Standard & Poor’s 500 as of mid-day trading. The US markets are trading slightly higher today, and are on course for positive territory for the year.

The European nations could fall back into recession in the 1st quarter of 2012, where as the US is showing slow steady growth. As the US inches along, in a long slow recovery, most of Europe is still waiting for a recovery plan.

As budget deficits and debt continue to grow the European markets will continue to decline. The EU leadership just does not seem to see the problems.

In a surprise announcement today, German Finance Minister Wolfgang Schäuble says he expect the crisis in the Eurozone to stabilize next year and does not foresee any countries exiting the single currency, according to an interview with German newspaper Handelsblatt.  He stated “I believe that we will have the contagion risk under control in the next 12 months and so will have achieved stabilization in the Eurozone”

When asked about the future of the Euro, the Minister responded  that current conditions did not suggest the possibility of a break-up of the Eurozone.

He stated that the EU is in the process of implementing the plans reached at the Dec 9 summit, “if implementation of those decisions goes as planned, we have the prospect of real stability in the Union”.

Once again, it seems that there is no short term plan to deal with the current crisis and that these politicians are turning a blind eye to the current situation.

 

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