Weakening demand sparks slide (FT.com)

Weakening demand sparks slide
By Rachel Morarjee

Published: December 2 2008 02:00 | Last updated: December 2 2008 02:00

European equities fell yesterday as the spectre of weakening demand came back into focus after manufacturing data from the eurozone and UK pointed to a deep recession.

Manufacturing activity in October, as measured by Europe's purchasing managers, fell to its lowest level since the survey began in 1997. "All-time lows in total orders, export orders and backlogs of work, bode ill for future activity," said Howard Archer, chief economist at Global Insight.

The benchmark FTSE Eurofirst 300 fell 6 per cent to 810.04, Frankfurt's Xetra Dax slid 5.9 per cent to 4,394.79 and the CAC 40 in Paris shed 5.6 per cent to 3,080.43.

Erik Nielsen, Goldman Sachs chief European economist, said: "We don't expect growth to return to trend until well into 2010. If we are broadly right on this path, it'll be the greatest post-war recession in euroland."

Cars and truckmakers continued to suffer as manufacturers considered further measures to curb production as demand weakened.

German truck company MAN was the latest company to cut production. MAN said it was shutting three German plants from December 12 to January 9, and would probably look to shorten working hours later this month. Its shares fell 8 per cent to €32.81.

In France, Renault announced last week it would close its Moscow plant for two weeks this month, and analysts predict that because of Russia's new year public holidays, the assembly line could be silent for up to a month.

Shares in BMW were down 3.9 per cent to €18.90, Porsche slid 7.8 per cent to €46.65 and Daimler lost 7.3 per cent to €22.85. Renault slipped 7.2 per cent to €15.98 and Peugeot lost 5.1 per cent to €13.50.

All of this spelled further demand weakness for steelmakers. Paris-listed ArcelorMittal lost 11.9 per cent to €16.51, Germany's Salzgitter shed 14.7 per cent to €46.35 and Austria's Voestalpine lost 13.5 per cent to €14.28, while Sweden's SSAB slipped 10.9 per cent to SKr57.25.

Copyright The Financial Times Limited 2008