FRANKFURT -- Europe is tense, with the German stock market continuing to crumble and the euro hitting another low against the dollar.
Wednesday afternoon dropped out of its tight range, slipping below key support at 4750 and triggering strong sell signals. The Dax opened modestly higher today but enthusiasm quickly vanished, and in electronic trading the blue-chip index was down 42 points at 4626.
Big losers included
, down 3.4%,
, down 5.3%, and energy group
, down 4%.
Damage was heavier on Germany's highflying
New Market Index
, which includes more tech issues and gave up 6.4%.
Nick Glydon, technical analyst at
Robert Fleming Securities
in London, said the break below Dax 4750 struck a major blow to the already underperforming market in Germany, which is suffering from generous wage agreements, political confusion and a slowing economy.
Glydon thinks a Dax rendezvous with support at 4500 is a certainty, and that German weakness might spread across Europe. "I have a horrible feeling that the Dax is an early indicator for all of Europe," he said.
In London the
was down 19 at 6028 and in Paris the
was up 21 at 4025.
European Central Bank's
policymaking Governing Council is meeting in Frankfurt today, but consensus is that the key short-term rate will be left unchanged. The market nonetheless is ruling nothing out. Traders remember quite well Dec. 3, when the Bundesbank and other euroland central banks sprang a rate cut on an unsuspecting market.
The nervous mood in Europe was underscored by further weakness in the euro, which this morning slipped below support at $1.0850 for the first time. The dollar also gained against the yen to 122.99.
The weaker euro reduced the allure of European bonds, with yields on the benchmark 10-year German bund rising 4 basis points to 4.17%.
Roland Lienau, head of capital markets at
in Frankfurt, said, "With yields rising, valuations are becoming stretched." And thinks the major European stock indices will fall further.
On the corporate front, a rise in crude oil prices helped lift the oil sector, with
up 2.6% and
The French market was keeping its head above water with help from banks.
Banque Nationale de Paris
was up 5%,
Credit Commercial de France
up 4.5% and
French telephone equipment firm
was up 2.6% after announcing a second purchase this week of a U.S. company. Alcatel said it was paying $350 million in cash for California-based
Assured Access Technology
. Alcatel earlier this week agreed to buy
for $2 billion.