Chemical stocks fall as Europe governance plan fails to impress

17 August 2011 13:45  [Source: ICIS news]

LONDON (ICIS)--Petrochemical companies were among the biggest losers on European stock markets in early trading on Wednesday, as investors were unconvinced by German and French plans for closer economic governance in the eurozone.

The Dow Jones EURO STOXX Chemicals index, which tracks Europe’s biggest petrochemical companies, was down by 1.1% to 591.7 points in early trading on Wednesday. The index hit a year high of 745.80 points on 2 May. Shares in Swiss specialty chemical maker Clariant dropped the most, falling by 4.25% to Swiss francs 9.92 ($12.49, €8.62) on the Swiss virt-x exchange.

Early losses for the sector outstripped those seen on most European general indexes, with the Dow Jones EURO STOXX 50 down by 0.74% to 2,306.51 points and the FTSE 100 down by 1.01% to 5,303.4 points.

Regional markets slid as investors voiced concerns that plans for closer economic management across the eurozone that were announced on Wednesday would not be enough to avoid a repeat of the recent turmoil across 17-member eurozone.

French President Nicolas Sarkozy and German Chancellor Angela Merkel, the leaders of the eurozone’s biggest economies, met in Paris on Tuesday to discuss fresh measures to shore up confidence in the monetary union.

In a press conference held after the meeting, they said they believed the eurozone needed a “real economic government” made up of heads of state and overseen by an elected official. The new authority would impose standard corporation taxes across the union and a set of “golden rules” including deficit reduction measures and budget balancing, they said.

However, the pair stopped short of announcing a regional bond issue, seen by some analysts as a necessity to allay fears about the ability of some of the eurozone’s member states to pay down their debts, especially given a recent weakening in regional and global economic growth.

The meeting came a few days after Eurostat, the EU’s statistics agency, published a report that showed a 0.7% drop in industrial output across the eurozone for June 2011 compared with May, but a 2.9% year-on-year output increase for the month.

The wider EU27, which accounts for all members of the EU, including those that are not part of the euro, posted a 1.2% fall in output between May and June 2011 but a 1.7% increase in output for the year to June 2011, Eurostat said in the 12 August report.

On Wednesday, Eurostat released another report that showed rising inflation in the eurozone, adding to fears over a toxic combination of stagnant growth and a higher cost of living. On an annualised basis, inflation was 2.5% in June for eurozone members, up from the 1.7% recorded in the year to June 2010.

The biggest contributors to growing inflation were transport (5.5%), housing (5%) and alcohol and tobacco (2.9%), Eurostat said.

Crude prices gained more than $1.00/bbl on Wednesday, taking Brent crude on ICE Futures above $110/bbl, after a report showing gasoline stocks in the US fell by more than 5.3m/bbl last week.

($1 = €0.69)

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By: Peter Salisbury
+44 20 8652 3214



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