Thursday 14 December 2017

Debt crisis pushes bonds and shares to six-week low

Donal O'Donovan

SHARES and bonds fell sharply to reach a six-week low yesterday as the European debt crisis entered a dangerous new phase and with signs the economic slowdown has spread to China.

European shares closed at the lowest prices in seven weeks yesterday. The euro area stock exchanges were the hardest hit, driven lower by falling bank shares.

In Madrid the main stocks index fell more than 2pc as Spain looked to be on the brink of a bailout deal yesterday. In Paris the CAC index closed down 1.7pc, Frankfurt's DAX closed down 80 points or 1.4pc and in Milan the main stock market was also off by more than 1pc.

The ISEQ index of Irish shares closed down 1.24pc and shares were weaker across all sectors.

Shares in Greencore slipped 3pc to 69 cent each as hopes for a takeover bid appear to recede.

Elan came off its recent highs to end the session down 2.6pc lower at €7.50.

Bank of Ireland also lost 2.6pc, after plans for further burden sharing with junior lenders to the bank were announced.

The big story in the markets, however, is the wider debt crisis. In the bond market no eurozone borrower escaped falls -- even German bonds weakened after a failed bond auction.

Belgium's government debt suffered the most worrying decline. Belgian 10-year bond yields rose above 5pc yesterday. The difference between Belgian and German 10-year borrowing costs hit a new high.

Fears for the sovereign affected the country's banks with shares in Belgian lender KBC down 8.7pc yesterday.

Sovereign spreads widened for France too, also sending some bank shares lower.

Shares in Natixis fell 6.8pc and shares in Societe Generale slid by 2.7pc.

In New York both the Dow Jones and the Nasdaq index suffered big falls, following the trend of plunging prices in Asia and Europe.

The euro fell to its lowest level since October 6. Copper -- often seen as a measure of confidence in future economic growth -- dropped to a one-month low and oil and sugar both plunged.

Haven

Even gold -- seen by many as a safe haven when times are tougher -- fell in the general sell off.

Gold fell yesterday driven by worries about the eurozone debt crisis, which weakened the single European currency against the dollar, mitigating the impact of safe-haven bullion buying.

Gold fell by 1.08pc to US$1,681.49 an ounce. Silver prices also dropped.

As global investors dumped risk they piled into US dollars -- the last safe haven as far as many are concerned.

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