By Carla Mozee, MarketWatch
European stocks dropped sharply Friday, pulling lower along with
other global markets, with traders attributing the moves to changes
in Chinese trading rules.
Heightened worries about a default by Greece also contributed to
the dark mood on the financial markets. Friday's hefty losses drove
European indexes deeper into the red for the week. Germany's DAX 30
logged its worst week since November 2011, with 5.5% decline.
The Stoxx Europe 600 on Friday fell 1.8% to 403.69, led by
nearly 2% fall for the basic materials group. The Stoxx 600 ended
the week down 2.2%, the biggest such fall since December.
European equities began tumbling in late-morning trade, along
with U.S. stock futures, after heavy selling in futures tied to
Chinese stocks. The drops came after the Securities Association of
China said fund managers may lend shares for short selling, and
will also expand the number of stocks investors can short sell.
At the same time on Friday, the China Securities Regulatory
Commission "banned the margin trading business of brokerages from
taking part in umbrella trusts," Bloomberg News reported.
As for the ban, "any sort of regulation for the market,
particularly one that so buoyant like that in China, is never seen
as a good thing as it's literally a physical impact on the kind of
trading that can be done. The actual trading itself is getting
limited, potentially," said Jasper Lawler, market analyst at CMC
Markets.
The moves in China come as Chinese stocks have rallied this
year. The Shanghai Composite is up 32%, and Hong Kong's Hang Seng
Index has gained 17%.
Mining companies are sensitive to moves made in China, a key
buyer of metals and other commodities. The U.K.'s FTSE 100 was
pushed 1% lower to 6,990.26, with mining giants Rio Tinto PLC (RIO)
and BHP Billiton PLC down 1.4% and 1.6%, respectively.
France's CAC 40 fell 1.6% to 5,143.26 on Friday, closing the
week down 1.9%.
DAX and Athens: Germany's DAX on Friday was shoved down 2.6% to
11,688.70. Before the Chinese-stocks news, the DAX had already been
moving toward its first weekly loss in four weeks.
Concerns about Greece's debt troubles has hurt risk sentiment,
and in turn has pressured the DAX, said Fawad Razaqzada, technical
analyst at Forex.com. As well, gains this week for the euro
(EURUSD) "has weighed on German exporters and that has eroded their
attractiveness. That's given investors a reason to take profit from
these repeated record levels we've seen in the past few
months."
The DAX on April 10 hit a record closing high of 12,374.73. The
euro has moved back above $1.07 against the dollar following a
round of weak U.S. economic data.
Meanwhile, the yield on the 10-year German bond on Friday
slipped 1 basis point to 0.7%.
Greece's Athex Composite turned lower on Friday, falling 3% to
729.81. Stocks finished down nearly 6% for the week. Also this
week, Greek bond yields rallied as prices fell, and borrowing costs
on government bonds jumped back to levels not seen since 2012.
Read: Signs the market is girding for a Greek default, in 4
charts
(http://www.marketwatch.com/story/signs-the-market-is-girding-for-a-greek-default-in-4-charts-2015-04-16)
There have been no signs of progress in negotiations over
Greece's bailout, suggesting Greece and its creditors won't strike
an agreement regarding Greek economic reforms before the April 24
Eurogroup meeting. Pierre Moscovici, the European commissioner for
economic and financial affairs, told the Financial Times that
Greece needs to agree to reforms by May 11
(http://www.marketwatch.com/story/top-eu-official-to-greece-agree-to-reform-by-may-11-or-else-2015-04-17).
Read: Schaeuble, Varoufakis see little common ground on Greek
aid
(http://www.marketwatch.com/story/schaeuble-varoufakis-see-little-common-ground-on-greek-aid-2015-04-16)
Elsewhere, the pound (GBPUSD) traded above $1.50 on Friday after
data from the Office for National Statistics showed average weekly
pay rose 1.7% in February. The jobless rate fell to 5.6%, from
5.7%, the lowest level since mid-2008
(http://www.marketwatch.com/story/uk-earnings-grow-as-unemployment-falls-2015-04-17).
The U.K.'s FTSE 100 turned lower, losing 0.9% to 6,993.34.
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