24 June 2013 17:25 [Source: ICIS news]
LONDON (ICIS)--European chemicals stocks continued to slide on Monday in line with global markets, as investors reacted to fears that US stimulus money may dry up, weighed down by concern over a liquidity slowdown in China.
Fears that the Peoples’ Bank of China may refrain from acting to quell spiking interbank lending rates in the country, potentially leading to a liquidity crisis for one of the world’s largest economies, caused the Shanghai Shenzhen C SI 300 index to close down 6.31% on Monday.
State-controlled news organisation Xinhua attributed the spike in rates to shadow banking, namely the spread of unregulated financial transactions in the country.
“Analysts saw the move as the PBOC's attempt to force domestic lenders to stop channelling money into the informal banking sector, known as "shadow banking," which has boomed in recent years and fuelled concerns about financial risks,” the newspaper said in an editorial on 23 June.
Sell-offs in Asian markets exacerbated existing market concerns about the impact of a potential winding down of the US Federal Reserve’s $85bn/month quantitative easing (QE) programme.
Fed chairman Ben Bernanke said last week that QE levels could be scaled back by the end of 2013 and wound up entirely by mid-2014 if the momentum of the US recovery stayed strong enough.
The UK’s FTSE 100 index was trading down 2.1% from Friday’s close as of 16:29 London time (15:29 GMT), with the index dropping back to levels last seen in January 2013. Germany’s DAX index and France’s CAC 40 index closed down 1.24% and 1.71% respectively, while the US Dow Jones Industrial Average was down 1.41% in morning trading.
The DJ Euro Stoxx chemicals index was trading down 1.96% as of 15:45 GMT, with share price falls for each of its 24 constituent companies.
Worst-hit were UK-based specialty chemicals companies Elementis and Croda International, both of which had nearly 5% knocked off their share prices compared to Friday’s closing price.
Shares in Germany-based LANXESS’ fell by 4%, while Norwegian fertilizer producer Yara’s shares fell by 3.94%, and shares in UK polymer specialist Victrex had fallen by 3.82% as of 15:45 GMT.
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