Europe chemical stocks tumble on Italy's soaring borrowing costs

09 November 2011 15:15  [Source: ICIS news]

LONDON (ICIS)--Chemical stocks tumbled on Wednesday in line with European markets, as Italy’s soaring borrowing costs scared traders away from investing.

Financial markets were sent into turmoil as the yield on benchmark 10-year Italian bonds soared above the 7.0% level, widely viewed as unsustainable.

Portugal, Greece and the Irish Republic were forced to seek bailouts after their cost of borrowing reached this level. The current rate for Germany, by comparison, is 1.73%.

At 13:46 GMT, the UK’s FTSE 100 was trading at 1.95% down on the previous day’s close, Germany’s DAX had fallen by 2.67% and the CAC 40 in France was down by 1.94%.

At the start of trading on Wednesday, European chemical equities had risen, tracking Asian petrochemical shares.

Italian Prime Minister Silvio Berlusconi’s offer to resign the previous day had boosted optimism that Italy will appoint a leader who can guide the country out of its debt crisis.

Berlusconi has agreed to step down after the Italian parliament has approved austerity measures that include reforms demanded by eurozone leaders.

But earlier on Wednesday, as news spread of the soaring Italian bond yield figure, markets rapidly fell.

There are fears that the country, the third-biggest economy in the eurozone, could be the next victim of the debt crisis and investors are also concerned a coalition government may worsen Italy's financial situation.

Italy’s debts, at around €1,900bn ($2,639bn), are thought to be too big for Europe to bail out.

At 13:46 GMT, the Dow Jones Euro Stoxx Chemicals index was trading down by 2.32%, as shares in many of Europe’s major chemical companies fell.

German chemical major BASF’s shares had fallen by 2.22% and those of French chemical group Arkema were down steeply by 6.06%. Belgian chemical group Solvay’s shares had decreased by 1.07%, France-based industrial gases company Air Liquide was down by 1.72%, while Germany’s industrial gases and chemical engineering firm Linde was down by 3.57%.

Catalysts maker and precious metals trader Johnson Matthey of the UK was down by 2.42%, while Swiss specialties maker Clariant was trading down by 0.59%.

Additional reporting by Nurluqman Suratman

($1 = €0.72)

For more on influences that may shape the chemical industry see Paul Hodges’ Chemical and the Economy

By: Franco Capaldo
+44 (0)20 8652 3214

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