Irish buck European trend as financials cast a shadow
IRISH shares were down again yesterday as the yield on Irish bonds remained high and the cost of insuring Irish debt surged to near record levels, while traders waited for a decision on the future of Anglo Irish Bank.
The ISEQ Overall Index lost 0.89pc, or 24.87 points, to close at 2,757.77. The market slumped as low as 2,740 early in the day before recovering in the afternoon.
Just as on Tuesday, financials led the index down. The yield on 10-year government bonds remained over 600bps for most of the day while the spread on German bonds remained around the 380bps mark that had spooked traders.
"Exchequer returns for August, showing an on-target consolidation of the underlying fiscal position, have done little to soothe fears but will help to ease spreads over the medium term," said Aidan Corcoran of Davy Stockbrokers.
The high yield came at the same time as the cost of credit default swaps on Irish bonds jumped to 403.25bps, close to a record, indicating that market professionals believed the country was more likely to not pay back its debts.
Irish Life & Permanent was the hardest hit of the banks, slumping 4.01pc to €1.63, while Bank of Ireland slipped 2.78pc to 70c.
Away from the financials, construction heavyweight CRH lost 3.05pc after Nomura Securities cut its rating on the company to 'neutral' while recruitment firm CPL slid 2.06pc to €2.35 after saying revenue had declined 11pc in the first half of the year.
Those losses overshadowed a strong performance by Donegal Creameries, which closed up 8.2pc at €3.30. The agri-foods business is up nearly 14pc in two days as the market looked forward to its results today.
In contrast to Ireland, most markets in Western Europe gained on the day. Britain's FTSE 100 increased by 0.4pc while Germany's DAX advanced 0.8pc. The French CAC 40 finished up 0.9pc while the composite Stoxx 600 gained 1pc.
"The market remains very volatile so we are seeing relatively sharp reactions to positive news," said Henk Potts at Barclays Stockbrokers in London. "It just shows that investors are still very nervous."
In London, oil company BP gained 1.3pc after its credit rating was raised. It said that no single mistake caused the Macondo oil well to leak into the Gulf of Mexico.
Meanwhile, technology company ARM jumped 5.8pc. Royal Bank of Scotland said ARM won an order to put its technology in the latest application processor chip at Samsung.
PartyGaming, the operator of the PartyPoker online gambling site, soared 5.8pc after the EU's highest court said that German rules which limit the offering of sports betting and lotteries to state-controlled monopolies cannot be justified.