23 October 2012 17:43 [Source: ICIS news]
LONDON (ICIS)--European chemical stocks dropped on Tuesday as a result of eurozone market uncertainty following a ratings agency downgrade of five Spanish regions and weak quarterly earnings reports from of the US’ largest businesses.
US ratings agency Moody’s cut its ratings for five Spanish regions yesterday, including Catalonia, one of the engines of the Spanish economy.
Catalonia was downgraded to Ba3 from Ba1, while Andalucia, Castilla la Mancha, Extremadura and Murcia also had their ratings slashed by one or two notches, based in the majority of cases on shrinking liquidity and imminent debt repayment obligations, the agency said.
Last week, Standard & Poor’s downgraded Spain’s sovereign rating to BBB- from BBB+, one grade above junk status.
European chemical company shares were also impacted by a weak US earnings season, with US petrochemicals major DuPont announcing that it is to cut 1,500 jobs following a year-on-year plunge in third-quarter net income to $10m from the $452m reported during the same quarter last year.
Fellow chemicals giant Dow Chemical is also expected to post weaker results when it announces its third-quarter earnings on 25 October, according to analyst Zacks Investment Research. DuPont and Dow Chemical are seen as bellwethers for the global economy, as their products are used across a wide spectrum of sectors and geographies.
Spain’s IBEX 35 index closed down 1.64%, while the Dow Jones Euro Stoxx Chemicals closed down 2.75%. France’s CAC 40 index was down 2.20%, while Germany’s DAX and the UK’s FTSE 100 indices closed down 2.11% and 1.44% respectively.
Shares in many of Europe’s largest chemical companies also closed at a loss today, with German specialty chemicals manufacturer Wacker Chemie trading down 3.09%, chemicals giant BASF's shares closing at 4.07% lower, and shares in French specialty chemicals company Arkema down 5.05%.
One of the only bright spots in a gloomy chemicals market was Syngenta, which defied the bearish outlook to close up 0.64%, after posting a 6% year-on-year increase in sales for the third quarter of the year on Tuesday.
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