Chemical companies' shares drop in early trading on economic fears

05 August 2011 11:55  [Source: ICIS news]

Major chemical companies’ stock prices declined in Europe on Friday as commodity values tumbled in early trading and sell-offs continued worldwide on fears over economic growth and stability in the US and Europe. LONDON (ICIS)--Major chemical companies’ stock prices declined in Europe on Friday as commodity values tumbled in early trading and sell-offs continued worldwide on fears over economic growth and stability in the US and Europe.

Markets are losing confidence in the ability of politicians or the financial sector to rebalance the global economy, traders and brokers said.

“[It’s] the usual hatred of and disdain for bankers, coupled with utter disrespect for the competence and professional insight of politicians – especially EU ones – and utter disgust at how politicians and bureaucrats continue to rake in unearned public money for themselves while the economies they are stealing from go to hell in a handbasket,” said one European aromatics trader.

German majors BASF and Bayer were among the biggest losers in early trading, shedding 3.5% and 2% to trade at €54.63 ($76.94) and €49 per share respectively on the German bourse, the DAX. The DAX was down by 2.6% overall in early trading, while European chemical companies lost 1.74% of their value on Friday on average.

In the US, Dow Chemical ended Thursday down 10.2% after shares traded at $30.31. The Dow Jones Industrial Average, which tracks the value of the biggest publicly listed firms in the US, dropped by 4.3% overall on Thursday.

The falling stock prices came as traders sold off shares after becoming increasingly nervous over the stability of the global economy. Despite a deal brokered in the US to raise the country’s government-mandated debt ceiling by $2.4 trillion on 2 August, many analysts remain concerned about the country’s economy and expect bad news when the Department of Labor releases non-farm payroll figures later on Friday.

In Europe, a bailout of Greece’s government has not been enough to allay fears that a default could be imminent in Athens, Lisbon or Madrid. The European Central Bank announced a new programme of bond purchases from weak peripheral states on 4 August, but the move was seen as too little, too late. The Euribor, a key measure of interbank lending in the eurozone, slumped on Friday from 1.602% to 1.564%, the biggest fall in the rate since June 2009.

Falling values have not been limited to stock markets. On Thursday, Brent crude oil contracts for September settled at $107.25/bbl, down $5.98/bbl from the previous session. September WTI contracts finished the day down by $5.30/bbl. Both front-month Brent and WTI lost over 8% in value on Thursday’s close compared to Monday.

In chemical markets, traders reported that nominal values had dropped but that little business was being done as buyers and sellers waited to see if energy values would fall further or return to recent highs. European benzene values, which often move in line with crude markets, slumped towards the end of the week, with lower offers not met by any firm corresponding bids. Brokers quoted a price of around $1,235/tonne CIF (cost, insurance & freight) ARA (Amsterdam, Rotterdam, Antwerp), down $60 week on week.

Earlier on Friday, spot prices for petrochemicals fell in Asia on the back of an increasingly bearish outlook for demand.

($1 = €0.71)

Bookmark Paul Hodges' Chemicals and the Economy blog


By: Peter Salisbury
+44 20 8652 3214



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