Sunday 25 February 2018

ISEQ falls as financial watchdog says banks need cash

Peter Flanagan

Peter Flanagan

Poor showing in Italian debt sale and worry on Spanish banks weigh on mood

IRISH shares tumbled yesterday, in line with the rest of Europe, as the Financial Regulator said the Irish banks will need more capital and ongoing fears about the euro crisis.

By the close of trading in Dublin the ISEQ Overall Index had snapped a four-day winning streak to plunge 1.3pc, or 39.7 points, to 3,103.56.

The index fell steadily from the opening but the pace increased in the afternoon as traders from the US began to sell.

Twice as many shares fell as rose as the ISEQ closed barely above its intraday low. It has lost more than 5pc so far this month.

Bank stocks struggled for much of the day before a brief rally pared losses. Allied Irish Banks slid 4.5pc but Bank of Ireland closed unchanged.

Financial Regulator Matthew Elderfield told a German newspaper the Irish banks may need "another €3bn to €4bn" in the next five to six years.

"In the medium term they will certainly need more capital, simply because of stricter international capital requirements," he told business newspaper 'Boersen-Zeitung'.

Construction giant CRH dropped 2.93pc to €14.07. The firm followed its peers in the US lower, after pending home sales there dropped to their lowest point in a year.

That slump hit sentiment on Grafton Group, which slid 2.76pc to €2.82 by the end of the day.

Commodity stocks were hit hard, as Brent Oil fell to its lowest level in seven months, dropping below $103 barrel in London as stockpiles hit a record.

Petroceltic (down 11.1pc), Dragon Oil (down 3.4pc) and Providence Resources (off 1.45pc), were all hit on the day.

Conversely, the lower oil prices boosted a number of companies that would have lower fuel and manufacturing costs.

Kerry Group was one such firm, closing up 1.1pc at €34.65.

Elsewhere, European stocks dropped the most in a week as Italy failed to meet its maximum target at a debt sale, Spain struggled to bolster its banking system and a Greek poll showed increased support for parties opposed to spending cuts.

National benchmark indices dropped in all the 18 western European markets.

Dropped

The benchmark Stoxx 600 Index fell 1.5pc. The UK's FTSE 100 dropped 1.7pc and Germany's DAX fell 1.8pc, while France's CAC 40 slid 2.2pc. Greece's ASE Index slumped 3.2pc.

"Everything seems to be going out the window," Chris Beauchamp, a market analyst at IG Index in London, said. "Yields have shot up once again; it really looks as if Spain is teetering on the brink. It feels like we are getting to a similar point before we saw the bailout of Portugal and Ireland."

Italian bonds fell for a fourth day, the longest stretch in more than a month. The nation's borrowing costs rose at an auction as it sold less debt than the maximum that was planned.

In Spain, the cost of insuring against sovereign default rose to a record. The spread against German bunds remained above 500bps for the third day in a row. Ireland survived a situation like that for 16 days before seeking a bailout.

Chemical group BASF dropped 2pc after German media quoted the deputy chief executive as saying the company wasn't seeing the kind of dynamism it expected in Asia.

BHP Billiton and Rio Tinto declined 2.5pc and 4.1pc respectively. Copper fell for a second day.

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