Tuesday 16 January 2018

Greek exit fear sends ISE tumbling

Peter Flanagan

Peter Flanagan

IRISH shares tumbled yesterday, snapping a three-day winning streak, as speculation that Greece may leave the euro pummelled markets across the continent.

By the end of a bloody start to the week on equity markets the ISEQ Overall Index had fallen 69.34 points, or 2.2pc, to reach a three-month low of 3,088.31. The close was the lowest for the index since February 2.

Greece's President, Karolos Papoulias, failed to secure agreement on a unity government and avert new elections. Syriza, the left-wing group opposed to spending cuts, defied overtures to join the government yesterday.

The possibility of the country leaving the single currency appeared to be moving closer. Central Bank governor Patrick Honohan, speaking in his capacity as a European Central Bank governor, was quoted at the weekend as saying that "technically, it [a Greek exit] can be managed. It is not necessarily fatal, but it is not attractive." Such sentiments from the ECB would have been unthinkable only a few months previously.

Commodity-based companies had a particularly tough Monday. Dragon Oil slid 5.1pc to €6.60 while Petroneft (down 10pc) also fell. Brent crude fell again in New York, dropping one third of a percent to $111.52.

CRH endured a particularly tough session, losing 4.3pc to fall to €13.90.

Plunged

Elsewhere, National benchmark indices fell in all of the 18 western-European markets. The UK's FTSE 100 declined 2pc. France's CAC 40 lost 2.3pc. Germany's DAX dropped 1.9pc. Greece's ASE Index plunged 4.6pc to the lowest level since November 1992. The benchmark Stoxx Europe 600 Index lost 1.8pc.

"With no new Greek government in sight, I think we will see continued insecurity and volatility in financial markets this week," said Alessandro Fezzi, senior market analyst at LGT Capital Management in Pfaeffikon, Switzerland.

A gauge of European banking shares was among the second-worst performer of the 19 industry groups in the Stoxx 600. HSBC tumbled 1.5pc. Deutsche Bank and BNP Paribas dropped 4.1pc and 3.7pc respectively.

Bankia plunged 8.9pc after the Spanish lender said provisions for soured property loans will be 115 times last year's earnings.

Invensys, the British maker of controls for washing machines and factory equipment, advanced 3.2pc amid continuing speculation it may be a takeover target.

Separately, Plus Markets Group, which operated the smallest UK stock exchange, will close after failing to find a buyer. London-based Plus "will be wound down over a period of up to six months in order to minimise market disruption," it said.

Irish Independent

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