Shares plummet after double blow
Published 19/08/2011 | 05:00
IRISH shares tumbled to their biggest one-day points loss in 16 months yesterday as renewed concern on the state of the global economy and a bearish report from a US investment bank sparked a wave of selling across the index.
By the close of trading the wreckage was spread far and wide, with the ISEQ Overall Index down 4.35pc, or 111.58 points, to 2,454.68 -- its lowest point since April 2009.
The index lurched into negative territory from the opening, and only got worse as the day wore on. A minor recovery got the index back up above 2,450 but on the whole there was little respite for traders all day long.
Poor UK economic data and a report that showed higher-than-expected jobless claims in the US were bad enough, but a report from Morgan Stanley said the US and Europe were close to recession again.
"Our revised forecasts (for growth) show the US and the euro area hovering dangerously close to a recession -- defined as two consecutive quarters of contraction -- over the next six to 12 months. It won't take much in the form of additional shocks to tip the balance," the report said.
CRH was the big loser on the day, dropping 7.65pc to €11.45 only two days after posting strong interim results. The ongoing economic troubles in the US could hit their business particularly hard, as it makes around half its profits from North America.
Other construction-focused stocks struggled, with Kingspan losing 6.24pc to €5.86.
Food stocks were caught up in the sell-off, with Kerry Group (down 1.33pc), Glanbia (off 4.14pc) and Aryzta (down 5.03pc) all losing ground.
Around Europe it was a similar story.
European equities plummeted the most in more than two years.
Benchmark indices fell in all of the 18 markets in western Europe as the UK's FTSE 100 dropped 4.5pc and the German DAX lost 5.8pc, the most since 2008. The Stoxx Europe 600 Index closed down 4.8pc while Sweden's OMX 30 declined the most of any European market, sinking 6.7pc.
"Recession risk is the key call," said Bill O'Neill, the London-based chief investment officer for Europe, the Middle East and Africa at Merrill Lynch Wealth Management. "To some degree, there has been disappointment in terms of corporate activity, certainly in terms of jobs growth. We will see a weakening of growth close to stagnation in Europe in the second half of this year, but I don't see a lurch into recession."
HSBC sank 6pc and Barclays plunged 11pc, leading declines on the FTSE 100. Rio Tinto declined 6.5pc. Xstrata and BHP Billiton fell 10pc and 6.5pc respectively.