Markets fret over Europe's growth as Italians seek government
EUROPEAN stock markets were on a downward trajectory yesterday as Italian politicians remained at loggerheads over the formation of a new government and a gauge of pending home sales in the United States slipped from the near three-year high.
Italy's FTSE MIB Index shed 1.6pc by lunchtime as the leaders of the Five Star Movement said they will not form a coalition government with Pier Luigi Bersani, the leader of the Democratic Party.
Mr Bersani won a majority in the lower house of Italy's parliament last month. He needs additional support in the Senate to form a viable government.
Italian bond yields widened 15 basis points to 4.73pc as the meeting left Mr Bersani without the means to assemble a majority in the Senate.
He will probably have to strike an alliance with former Prime Minister Silvio Berlusconi or abandon his attempt to form a coalition government.
Investors are also continuing to fret over Europe's growth prospects.
"We haven't taken any positions against Europe, but we think the growth story is just not there at the moment," Axel Weber, chairman of UBS said.
"We think the structural problems are unresolved. I still think there is some potential for equities to improve particularly for the US."
In Ireland, the ISEQ Overall Index had dipped 4.45 points to 3,919.07 soon after lunchtime. Earlier in the morning it had been trading close to 3,950.
Stocks on the move included shares in AIB, now virtually entirely owned by the State. Its shares were down 5.5pc at 6.8 cent after it said losses in 2012 narrowed to €3.6bn from €5.1bn in 2011. Operating losses were 65pc lower at €2.8bn compared to €8.1bn in 2011.
Shares in Bank of Ireland were down 3.8pc at 15 cent.
Shares in financial services group IFG jumped over 4pc to almost €1.40 even after it said that revenue and profits edged lower last year.
National benchmark indices were lower in all 18 western- European markets by mid afternoon. The UK's FTSE 100 declined 0.7pc, France's CAC 40 dropped 1.6pc and Germany's DAX slid 1.5pc.
Safran declined 2.5pc to €34.60 as France's finance ministry sold €449m of shares in Europe's second-biggest maker of aircraft engines. Societe Generale placed the shares at €34.50 apiece, according to an update sent to clients. The stock closed at €35.49 on Tuesday.
Belgacom slid 2.1pc to €19.18 as Belgian newspaper De Tijd reported the government has considered selling stakes in some of its assets to help keep the national debt below 100pc of gross domestic product.
TUI Travel rose 2.8pc to 319.1p after saying the company remains well placed to meet its full-year performance targets. The company said it expects to report operating profit growth toward the upper end of its guidance of 7 to 10pc.