MADRID (MarketWatch) — European stock markets ended lower Monday on increased fears that Greece is headed for default, as French banks led losses on speculation they could be downgraded over their exposure to that troubled euro-zone nation.
“This is an environment in which normal rules don’t hold anymore,” said Peter Dixon, strategist at Commerzbank. “This is fear, uncertainty and all the other nasty things associated with market panics. You can forget fundamentals, valuations.”
The Stoxx Europe 600 index slid 2.5% to close at 218.93. The market closed down 2.6% on Friday, rattled by news that Juergen Stark, a member of the European Central Bank’s executive board and governing council, will step down by year’s end.
Stark cited “personal reasons,” but news reports pointed to discord over the ECB’s bond-buying program. The Stoxx 600 lost 3.7% for the week overall.
European-sovereign-debt worries continued afresh on Monday, driving Asia stocks lower, while Wall Street opened lower as well.
The French CAC 40 index -4.03% , which dropped 4% to close at 2,854.81, bore the brunt of Monday’s losses with BNP Paribas SA FR:BNP -12.35% plunging 12.3%, and Credit Agricole SA FR:ACA -10.64% and Societe Generale SA FR:GLE -10.75% each falling more than 10%. Insurer AXA SA FR:CS -9.73% slid 9.7%.
Societe Generale released a statement Monday, trying to reassure investors over its exposure to Greek debt. The firm also said it will free up 4 billion euros ($5.4 billion) in capital by 2013 via business asset disposals. Read more on Societe Generale’s plans
That came amid weekend media reports citing persons with knowledge of the situation that French banks could be facing a downgrade from Moody’s over their exposure to Greek debt.
Chief Executive Frederic Oudea said that a possible downgrade by Moody’s “won’t change the outlook of the bank.” He spoke on a conference call on Monday related to the bank’s earlier statement, according to a report by Dow Jones Newswires.
Also in France, one person was killed and three injured at a blast at a French nuclear waste treatment site in the south of the country.
Meanwhile, fears that Greece may not meet the terms of its aid package have been growing and the cost of protecting European bank and government debt against default surged on Monday.
Media reports said German officials have been meeting to figure out how to protect the nation’s banks from a potential Greek default.
The German DAX 30 index fell 2.3% to close at 5,072.33, with shares of Deutsche Bank AG DE:DBK -6.94% DB -7.00% sinking 7.3%. Commerzbank AG DE:CBK -11.16% fell 8.3%.
Jitters rattled throughout Europe’s banking sector, with Italy’s Unicredit SpA IT:UCG -9.99% down 10.9% and Banco Santander SA STD -9.02% ES:SAN -4.69% in Madrid. Italy’s FTSE MIB index fell 3.9% and the Spain IBEX 35 index declined 3.4%.
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