French Banking Stocks Tumble on Expectations of Downgrades and Greek Default
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French Banking Stocks Tumble on Expectations of Downgrades and Greek Default

French Banking Stocks Tumble on Expectations of Downgrades and Greek Default


It’s not a pretty start to the week with a sea of red hitting traders screens this morning, in particular the French market which is being absolutely battered.

France’s Cac index has now breached its lows from August and is only 15% or so off the lows it formed in March 2009 following the last banking crisis; to compare, the FTSE, is over 30% off those lows.

Note that I say “the last banking crisis” as the current situation could almost be placed in the same category, with the Eurozone crisis continuing to worsen day by day.

UK papers are full of headlines about the Vickers report on banking that’s due for release today and will recommend that the banks should be spilt up, nothing new then.

This will cost the industry dearly, as if the life blood of our economy hasn’t suffered enough changes of late, so the likes of RBS, Lloyds and Barclays are all lower by around 5%. However, this is dwarfed by the crisis in Europe where many banks are lower by well over 10%.

For French stocks, we can expect a downgrade to French banks from Moody’s this week, the credit ratings agency that’s had them on review for the last three months.

Their banking sector is one of the most exposed to Greek debt and when you have rhetoric changing from “if” the Greeks default to “when”, then investors are going to push the sell button and push it hard.

All this will be making things even worse for confidence which is seriously beaten up as it is already.

With the spread betting markets tumbling and banking stocks taking the brunt of the selling, it’s going to make getting finance for individuals and crucially businesses even harder.

The most recent BDO survey on business confidence showed it has hit its lowest level since June 2009, which doesn’t make good reading for an economy that is flat lining.

This morning the indices spread betting sell off has seen the FTSE 100 fall to 5100 at the time of writing, still just above its recent lows.

Near term support is at 5050, which the market looking dangerously close to testing, whilst upside resistance is expected at 5200/85 and 5325 if we can recover that far.

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'French Banking Stocks Tumble on Expectations of Downgrades and Greek Default' by DB, updated 12-Sep-11

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