Banks take pummelling over double-dip recession fears

By CHRIS GRAEME [email protected]

The United States stock market has shown consistent signs of recovery since Chairman of the Federal Reserve, Ben Bernanke, stated that the US Central Bank would “do everything to prop up the economic recovery.”

But last week’s comments were of cold comfort to the Lisbon stock market, Bolsa de Valores de Lisboa, and its PSI20 Index of 20 top companies which saw at least one per cent wiped off the value of the nation’s shares.

At the heart of the problem are fears that the United States could be sliding back into recession after less than encouraging economic indicators on the other side of the Atlantic.

The PSI20 lost 1.08 per cent, falling to 7,309.52 points at the close of business on Monday in line with the main European stock markets.

In Lisbon, bank shares were among the hardest hit on the PSI20, with BCP, BES and BPI seeing 1.4 per cent wiped off the value of their shares.

Portugal Telecom also shrank back 0.88 per cent to 9.15 Euros a share, while Sonaecom fell back 0.83 per cent to 1.43 Euros.

EDP lost one per cent to 2.4 Euros per share while Galp suffered a 0.83 per cent shave and Mota Engil shares shrank 1.38 per cent, probably influenced by disastrous results with profits falling 66 per cent to 19.59 million Euros compared with the previous financial year.

However despite the fears, growth figures for Germany, France and the UK, showing sustained improvement for the third quarter running, suggest that Europe may be coming out of recession.

The European Commission’s economic indicators showed improvements into August in many countries although Portugal continues to be mired in an atmosphere of caution, pessimism and sluggish growth.

Following an increase in performance indicators in July, confidence plummeted from 93.3 points to 90.8 points, still up, however, on the country’s lowest point of 68.6 points registered in February 2009. Portugal registered its highest confidence rating in March 1998 at 116.2 points.

The latest fall has been measured from a range of economic indicators in the financial services, retail, construction and commercial sectors.

However, the Portuguese National Statistics Institute (INE) on Monday issued its economic confidence indicator figures for the past three months which showed confidence remaining stable but low at 0.1 points – its highest value since September 2008 in the depth of the crisis.

At the same time, local consumer confidence figures also saw light at the end of the tunnel registering a slight recovery from -41 to -40.3 for the past three months.

On Monday, the President of the Japanese Central Bank, Masaaki Shirakawa, joined Ben Bernanke in warning of the threat of a renewed recession, stating that now was not the time to withdraw extraordinary monetary stimulation measures (quantitative easing) implemented during the economic crisis.