ISEQ struggles as economic concerns drive banks down
IRISH shares struggled yesterday as ongoing concerns about the state of the economy continued to weigh on the market.
The ISEQ Overall Index lost 1.45pc, or 39.7 points, to close at 2,710.33 as the yield on Irish 10-year government bonds remained at 6.2pc and the spread against the benchmark German bunds stayed close to 3.8pc.
Market insiders said that until the cost of dealing with Anglo Irish Bank had been finalised, uncertainty would continue.
"As long as they put clear blue water between themselves and the liabilities of the banking system they [the Government] will be able to handle their existing and foreseeable sovereign exposure," said Willem Buiter, chief economist at Citigroup.
Those concerns helped drive the banks down, with Bank of Ireland losing 2.31pc to 64c and Allied Irish Banks falling 5.85pc to 60c. Irish Life & Permanent slumped 7.18pc to €1.45.
Agri-foods business Origin Enterprises slipped 1.79pc to €2.75 despite beating market expectations with its annual results.
On a day when red ink dominated the market, few stocks finished in positive territory. One of those was Providence Resources, which closed up 8.33pc at €1.95 after the oil and gas explorer indicated it would be increasing its oil reserves.
Aer Lingus jumped 0.98pc to €1.03 after Ryanair's chief executive Michael O'Leary said a takeover was crucial to the future of the state carrier.
Around the rest of Europe, national benchmark indexes retreated in 16 of 18 markets.
France's CAC 40 fell 1.1pc, while the UK's FTSE 100 Index slid 0.3pc. Germany's DAX dropped 0.9pc.
The composite Stoxx Europe 600 Index lost 1.3pc as central banks signalled they may need to administer more stimuli to prevent another recession.
"Investors are wondering how much more scope the Fed has to counter the economic slowdown," said Tammo Greetfeld, senior equity strategist at UniCredit Research in Munich.
"We remain cautious on equities as we don't expect any improvement of leading economic indicators in the coming months. There are also still some political risks weighing on the 2011 European budgets and those will be a burden for equity markets."
Santander, Spain's biggest bank, dropped 2.7pc after Credit Suisse downgraded the stock to 'neutral' from 'outperform'.
German carmaker Daimler dropped 1.9pc after 'La Repubblica' newspaper reported that they had made a "pre-offer" for Fiat Industrial, the truck and tractor unit of Fiat. Fiat rose 0.2pc.
Pirelli fell 2.8pc after Morgan Stanley downgraded Europe's third-largest tyremaker to "underweight" from "overweight."