Catastrophic day threatens stability
Published 05/08/2011 | 05:00
It was a catastrophic day for markets as fears heightened that Europe's debt crisis is escalating to a point that severely threatens the wider financial stability of the European Union.
European Commission president Jose Manuel Barroso summed it up when he said that developments in the sovereign bond markets of Italy, Spain and other euro-area member states were a cause of "deep concern" and reflected a "growing scepticism among investors about the systemic capacity of the euro area to respond to the evolving crisis".
The ECB left interest rates unchanged, but even that failed to stem a sharp fall in stock market indices around Europe.
Ireland's ISEQ Overall Index took a battering, as it shed 3.55pc, or 93.6 points, to finish the day at 2,545.51. The only consolation -- if indeed it is one at all -- is that other markets fared even worse. The index is now at the lowest level since the end of April 2009.
Among the significant fallers was packaging group Smurfit Kappa, which collapsed 11.7pc, or over 69c, to €5.22. That followed a 7pc fall on Wednesday.
A large chunk of the company's products end up on supermarket shelves where hard-pressed consumers may increasingly penny-pinch, while there's also an expectation that highly indebted companies such as Smurfit Kappa might have to deal with a tough credit environment in the future.
CRH -- the largest company trading on the ISEQ -- was dragged down a further 3.4pc, or 43c, to end the day at €12.13, having been hammered in previous sessions. There were plenty of other losers such as mining firm Kenmare Resources, which tanked 13.7pc, insulation maker Kingspan was off 8.28pc and builders providers Grafton shed just over 7pc.
There was better news for Petroneft Resources, which jumped 21.4pc, or 7.8c, to 44.5 cent. The company said it found oil at a prospect in Russia.
National benchmark indices fell in all 18 western European markets. The UK's FTSE 100 and Germany's DAX each slumped 3.4pc, while France's CAC 40 sank 3.9pc.
The Stoxx 600 sank 3.4pc to 243.3 at the close in London -- its biggest decline since May 2010. The index has declined 16pc from this year's high on February 17 as the yield on Italian and Spanish bonds surged to record highs amid speculation that Europe will fail to contain its sovereign-debt crisis.
"The market is driven by macroeconomic fears," said Stephane Ekolo, chief European strategist at Market Securities in London.
Lloyds Banking sank 10.1pc after it took a massive £1.7bn (€1.95bn) impairment on its Irish loan book and warned its loan quality in Ireland may worsen further.