Thursday 18 January 2018

Markets tumble over bailout fears

Peter Flanagan

Peter Flanagan

THERE was blood all over trading floors across the globe yesterday as fears that Spain and even Italy could end up seeking a sovereign bailout hammered markets, while Greece may still end up leaving the euro.

By the close of trading in Dublin, the ISEQ Overall Index had been swamped, dropping 2.3pc, or 73.68 points, to 3,132.32. That was the index's biggest percentage drop since May 5.

Traders sold from the opening bell yesterday, and by the end only two stocks had made ground, versus 26 that fell. At a little over 48m, volumes were below Friday's levels but significantly higher than the average over the previous fortnight.

The troika will arrive in Athens today amid doubts that the country will meet its bailout commitments.

Germany's Vice Chancellor, Philipp Roesler, said he was "very sceptical" the euro area's leaders would rescue Greece.

Spain's 10-year bond yield climbed to 7.5pc, the highest since the euro began in 1999, after 'El Pais' reported that six Spanish regions may ask for aid from the central government.

Allied Irish Banks and Bank of Ireland suffered heavy falls, sliding 5.9pc and 5.3pc respectively.

Both lenders are providing information into a UK probe into alleged mis-selling of interest-rate swaps to SMEs.

Sceptical

Packaging firm Smurfit Kappa Group dropped 4pc to €5.45 as fears about a slowdown in the global economy hit trading.

Ryanair lost 3.78pc to €3.93. Markets are sceptical that its bid for Aer Lingus can beat European competition concerns.

National benchmark indices fell in all of the 18 western European markets.

The Stoxx Europe 600 tumbled 2.5pc. The UK's FTSE 100 plunged 2.1pc, while Frankfurt's DAX slumped 3.2pc. The CAC 40 in Paris dived 2.9pc. Greece's ASE sank 7.1pc, its biggest loss since 2008. Spain's IBEX 35 dropped 1.1pc and Italy's FTSE MIB slid 2.8pc, paring earlier declines after the nations' market regulators introduced short-selling bans.

"The market has had a reality check, making it impossible to justify higher stock prices on so-so company reporting," said Henrik Drusebjerg, a senior strategist at Nordea Bank in Copenhagen.

"Concern over Greece and the situation in Spain, with Valencia signing up for a bailout, are part of the reality check -- but investors are also catching up with a string of bad data from the US last week and generally disappointing macro news from Europe."

BNP Paribas, France's biggest lender, sank 5.5pc and HSBC, Europe's largest lender, retreated 3.5pc. National Bank of Greece, the country's largest lender, tumbled 11pc.

Bankia advanced 7.6pc after earlier dropping as much as 9.6pc.

Irish Independent

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