ISEQ falls as bond spreads rise
IRISH shares fell yesterday, as bond spreads rose again, reigniting fears about the Irish economy, and as international data suggested the slowdown worldwide will continue.
On the day, the ISEQ Overall Index fell 0.58pc, or 16.19 points, to close at 2780.87. Most of the major stocks led the market down, with CRH and the banks overshadowing small gains in the foodstocks Aryzta and Kerry Group.
The banks all fell after the yield on Irish government bonds with a 10-year maturity date rose to just under 6pc, implying that the market feared the country would default on its debts.
Allied Irish Banks slipped 3.19pc to 70c, while Bank of Ireland fell 3.62pc to 67c. Irish Life & Permanent dropped a mere 1.47pc to €1.61.
Construction giant CRH lost 0.57pc, closing at €13, after a gauge of manufacturing in the US, where CRH does most of its business, declined more than forecast.
Those losses offset a positive day from the food sector, as investors moved their capital to non-discretionary goods that should remain strong during the downturn. Par-baked specialists Aryzta finished trading up 0.76pc at €33.80, while Kerry Group rose 0.55pc to €25.79.
It was a negative day elsewhere in Europe, with 15 of the 18 national benchmark indices falling after manufacturing slipped in the US and retail sales fell in the UK.
France's CAC 40 fell 0.5pc, while the UK's FTSE 100 slipped 0.3pc and Germany's DAX Index decreased 0.2pc. The composite Stoxx Europe 600 Index declined 0.8pc.
"There's no double dip in sight but we'll still see a weak recovery," said Heinz-Gerd Sonnenschein, an equity strategist at Deutsche Postbank.
"Company results in the third and fourth quarter won't be as good as in the two previous quarters so it will be difficult for equities to get a push to the upside. Market participants are in wait-and-see mode."
In London, BT fell 3.1pc after Morgan Stanley lowered its recommendation for the phone company and cut its price estimate for the stock by 18pc.
Analysts cited the possibility that the UK pension regulator could propose that BT cut the deficit in its pension plan in 10 years, rather than 17. If this happens, the phone company would have "no spare free cash flow beyond pension top-ups and dividend", the brokerage said.
BP rose 1.1pc after Citigroup said Cnooc, China's largest offshore oil explorer, may offer $10.2bn (€7.8bn) for BP's stake in Argentina's Pan American Energy.
Cable & Wireless Worldwide jumped 4.5pc, the biggest gainer on the FTSE 100. Goldman Sachs raised its recommendation for the telecoms company to "buy" from "neutral", citing the company as a potential "takeout target".