Thursday 21 September 2017

Shares fall following Moody's downgrade of Irish debt

Peter Flanagan

Peter Flanagan

IRISH shares slipped back yesterday, sending the index into the red for the week, on a day dominated by Moody's downgrade of Irish debt.

By the end of trading the index was down 0.70pc, or 19.88 points, at 2819.44, as the downgrade drove most stocks into the red and saw a slump in the banking sector on another day of light trading. Friday's close was marginally below Monday's opening of 2831.83.

Moody's lowered its rating of Irish debt to Baa1 from Aa2 -- three levels above non-investment grade and the same level as Russia and Lithuania. The outlook on the rating is "negative", Moody's said. If a further downgrade sees Ireland cut to "junk" status, that would see a number of investors sell Irish bonds as they may be only allowed hold "investment grade" debt.

"While a downgrade had been anticipated, the severity of the downgrade is surprising," said Glas Securities.

That downgrade instigated immediate selling, with the banks, who remain under government guarantee, being hammered. Bank of Ireland, which successfully completed a debt swap yesterday, was hit hardest, losing 13.78pc to close at 32c while Irish Life & Permanent tumbled 8.75pc to 96c. Allied Irish Banks fell 1.1pc to 45c.

The downgrade spurred selling across the board, with CRH also hit. It closed down 1.11pc at €15.21.

However, there were gains among some smaller firms, with Kingspan closing up 4.22pc at €7.01. Petroneft was another winner on the day's trading, finishing up 5.06pc at 83c.

Around Europe, stocks fell, erasing this week's advance, as an agreement among the region's leaders to create a crisis-management mechanism failed to ease concern that peripheral European nations may not repay their debts.

National benchmark indexes fell in 12 of the 18 western European markets. France's CAC 40 Index and Germany's DAX lost 0.5pc and 0.6pc, respectively. The UK's FTSE 100 Index slipped 0.2pc. The Stoxx Europe 600 Index fell 0.4pc.

"The European crisis is not over yet," said Martin Huefner, chief economist at Assenagon in Munich. "We have to take downgrades or reviews very seriously. On the positive side, we have good fundamental data and good profit from companies."

In London, Lloyds retreated 3.6pc after saying it expects to report an increased impairment charge of £4.3bn (€5bn) because of Irish loan losses.

Irish Independent

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