European markets recover, UK paper apologises for Société Générale rumours

The French bourse recovered on Thursday, as did other European stock markets, as rumours that hit them Wednesday were declared untrue. Britain’s Daily Mail has been forced to apologise to French bank Société Générale for saying that it could be “on the brink of disaster”.

Reuters/Pawel Kopczynski

European markets picked up on Thursday morning after Wednesday’s fall, which was largely prompted by rumours that France was set to follow the US in losing its AAA credit rating. France’s Cac 40 bounced back after plunging 5.45 per cent Wednesday.

The French government indignantly denied the credit-rating rumour yesterday, apparently reassuring the markets although economic indicators are still poor with unemployment rising again in May and June to 9.7 per cent.

On Thursday morning:

• Paris was up 2.96 per cent;
• London rose 2.2 per cent;
• Frankfurt was up 2.81 per cent;
• Madrid soared 3.01 per cent;
• Milan rose 2.79 per cent.

Société Générale’s shares were briefly suspended after losing 22.5 per cent at one point Wednesday and finishing the day 14.74 down.

France’s second-largest bank, after BNP, was almost driven out of business thanks to rumours that it was on the brink of collapse. The origin of the claim were quotes from an anonymous source in the Mail on Sunday newspaper that the bank was in a “perilous” state and “on the brink of collapse”.

On Thursday evening, after Société Générale boss Frédéric Oudéa toured French media denouncing the report as “pure fantasy”, the paper printed an apology stating that it was untrue.

The bank’s shares have fallen 45 per cent since the end of July and it announced a 31 per cent drop in profits on 3 August.

French banks, including Société Générale, are heavily exposed to Greek and Italian debt. On Thursday a Greek official said the term for the exchange of bonds under its new rescue plan might have to stretch out beyond 2020, longer than had been planned.

Asian stock markets fell on Thursday but closed off their earlier lows.Gulf stocks dipped in the morning but Scandinavian bourses rose slightly.