Bailout saga sparks share slump
SHARES fell everywhere yesterday on a frantic news day for the markets. Investors struggled to get to grips with the latest twists in the European bailout saga and the threat of war between North and South Korea.
Plunging bank shares dragged the ISEQ index of Irish shares lower as investors ditched shares in banks that they fear could be nationalised by the time the restructuring and recapitalisation of the sector is finished.
The worst hit was Bank of Ireland, whose shares plunged as much as 35pc, touching a low of 25c, before closing down 25pc at just 29c.
Shares in AIB finished the day down just over 19pc, reflecting general fears about Irish banks and how they will be affected by a bailout.
Meanwhile, the subordinated bonds of AIB have dropped 32pc of face value on fears that holders of the bonds will face the imposition of burden-sharing if the Government further increases its stake.
Irish Life & Permanent, which has been the most volatile of the financial stocks in recent weeks, closed down just over 10pc.
Away from the financials, shares were more resilient but there were few gainers.
CRH was down half of one per cent at 14.2250. Kerry fell one third of a per cent to €25.2 per share after it announced a US acquisition. Ryanair was almost unchanged at 3.8050.
Spanish shares were under intense pressure as fears of economic contagion mounted. Banks were badly hit, with shares in BBVA down 3.9pc and Santander down 4.7pc
On the currency markets, European woes increased pressure on the euro, which has fallen to September levels against the dollar. It was worth $1.34 yesterday.
The fall comes despite the US printing money that should have caused the dollar to fall against rivals. However, support for the dollar may have more to do with fears of the situation in Korea escalating than it does with the euro crisis.
A military confrontation on the Korean peninsula will encourage investors to buy the most robust currencies.
In the UK, the FTSE 100 index of the biggest companies closed at a six-week low after falling 1.8pc. Barclays Bank fell 2.1pc on news that the SEC in the US said $1.3bn of deals with Lehman Brothers in 2008 -- when it took on the failed bank's US staff and business -- may have breached rules.
The Paris CAX and Frankfurt Dax felt the same effect, closing down 2.5pc and 1.7pc respectively. Shares in the US dropped in tandem with European markets, despite news that the US economy had grown by 2.5pc in the third quarter.