Obama Optimism Counters Pessimism on European Markets

By Tom Rivers

London
20 January 2009

Pessimism over bank failures and optimism over the inauguration of Barack Obama are resulting in mixed trading around the globe.

While financial stocks in Asia took a dive Tuesday, shares in Europe were mostly steady as the inauguration of Barack Obama helped to offset the general market gloom.

In Japan, the Nikkei index lost 2.3 percent on concerns over the health of European banks. Elsewhere, Hong Kong's Hang Seng dropped nearly 3 percent.

In Europe, banks were again in focus. While Royal Bank of Scotland stock plunged 67 percent Monday after it forecast a record $41-billion loss for 2008, it regained a fraction of that. The RBS slide has affected other shares in the financial sector in Britain.

Analysts say the sector remains extremely fragile.

"I think this is just a real flow of very uncertain times where frankly the sector is just getting caned," said David Buik from the London investment firm BGC Partners. "We cannot really put anything on it apart from sentiment and this huge feeling of a black cloud of uncertainty, which we hope is cleared away before too long."

Meanwhile, the British pound has plunged to a 7.5-year low against the dollar because of those fears in the British banking community.

In the auto sector, Italian carmaker Fiat has agreed to take a 35 percent stake in Chrysler. As part of the deal, the U.S. automaker will gain access to Fiat's fuel-efficient technologies.