ISEQ falls with deficit bombshell
IRISH shares fell for the first time this week as investors gulped following news that the country's deficit as a percentage of gross domestic product is the biggest in Europe.
The benchmark ISEQ Overall index slid 42.51 points, or 1.3pc, to 3364.94 as the banks and Ryanair declined. National benchmark indexes fell in 17 of the 18 western European markets with Greece's ASE Index declining the most.
Allied Irish banks closed down 3.4pc at €1.50 after falling almost 7pc in early trading on concern borrowing was higher than expected. Bond yields widened although the market recovered in afternoon trading. Irish Life & Permanent closed down 4.8pc at €3.10. Bank of Ireland, which is starting talks with potential institutional investors about fundraising, slid 1pc to €1.80.
Ryanair slid 1.9pc to €3.84 after chief executive Michael O'Leary made an unusual U-turn and admitted that the airline would have to compensate customers who were unable to fly during the past 10 days. Providence Resources tumbled 16.3pc to 3.6c after publishing results the previous day.
Dragon Oil rose 3.4pc to €5.54 after issuing a bullish trading statement. Tullow was down 2.8pc at €14.10 after revealing a hitch with a partner's planned sale of asset in Ghana.
Stocks also slumped elsewhere in Europe as the euro-region's budget deficit widened to more than double the European Union's limit in 2009, fanning concern spiralling government debt will choke off the global recovery.
Nokia led declining shares, falling 14pc as the world's biggest maker of mobile phones reported lower-than-estimated first-quarter profit. Credit Suisse fell 4.7pc as the bank reported lower-than-forecast debt trading revenue. Nestle led rising shares as the world's largest food company said first-quarter sales climbed faster than analysts had estimated, fuelled by Nespresso coffee capsules and higher demand in Asia.
The Stoxx Europe 600 Index fell 1.1pc to 265.32. Europe's VStoxx Index, which gauges the cost of using options to protect against declines in the Dow Jones Euro Stoxx 50 Index, jumped 10pc to 24.7953.
"The market reacted strongly to budget deficit figures in the euro area that were a bit worse than expected," said Martin Huefner, chief economist at Assenagon in Munich. "I'm very much worried about the future. The market will deteriorate this year and the first improvement in budget deficits will not come before 2011."
BP, one of Europe's largest oil companies, retreated 1.8pc as the price of crude declined in New York. Liberty International retreated 3.3pc as Morgan Stanley downgraded the UK's largest shopping centre owner to "underweight" from "equal-weight."