Wednesday 24 January 2018

Shares plunge as doubts rise on Europe's capacity for a return to solid growth path

::: Markets Roundup

John Mulligan

Stock markets in Europe opened badly yesterday and things just got worse as the session wore on, with steep declines firmly dispelling any illusions that the €750bn bailout package announced this week by the European Union, the ECB and the IMF was going to provide any sense of immediate stability.

Investors were worried that European growth could stall under the weight of the severe cost-cutting measures only now being put in place by countries, including Greece and Spain. The concerns propelled the euro to an 18-month low against the US dollar.

The ISEQ Overall Index has been eroded once more, with the three-month chart now reminiscent of a profile of the Matterhorn.

The index plunged by 3.6pc to just under 3,101 yesterday, bringing it back to around the level it was at on May 6.

All stocks took a pasting with building materials giant CRH among the biggest fallers. It slumped 7.2pc, or €1.41, to €18.21. That brings it back to its price in mid-March.

Other notable fallers included Allied Irish Banks, which tumbled over 7.8pc, or nearly 11c to €1.24, while rival Bank of Ireland fell 4.6pc, or more than 7c to finish at €1.53.

Bank of Ireland holds both an EGM and AGM next week.

Irish Life & Permanent, which yesterday said that there was evidence the level of mortgage arrears may have peaked, wasn't spared a thrashing as it sank 5.2pc, or 13c, to €2.39.


Packaging giant Smurfit Kappa fell almost 3.3pc, or 20c, to €7.15.

Betting firm Paddy Power, which holds its AGM next Tuesday, climbed almost 1pc to €26, having been in the red for most of the day.

No-frills airline Ryanair shed 4.6pc, or 16c, to close the session at €3.35.

UK stocks, meanwhile, tumbled by the most in almost six months, led by a selloff in banks and mining companies, also amid the same fears over European economic growth prospects.

Barclays sank 6.1pc as Credit Suisse said in a report that new regulations may cost lenders as much as €244bn. Mining group Xstrata dropped 7.9pc as copper, aluminium and zinc prices retreated on the London Metal Exchange.

The benchmark FTSE-100 Index plunged 170.88 points, or 3.1pc, to 5,262.85 in London, the biggest retreat since November. The FTSE All-Share Index fell 3pc.

"Traders are becoming increasingly concerned that the sovereign debt issue still hasn't been laid to rest and more countries may start to struggle in the coming months," said London-based Anthony Grech, head of research at IG Index.

"Compounding this is a fear that banks could come under fire in the US from regulators."

The FTSE-100 has still gained 2.7pc for the week, recovering some of last week's 7.8pc decline, after the EU unveiled its aid package.

Barclays fell to £3.09, while Lloyds declined 4.7pc to 57.68p. Royal Bank of Scotland slid 3.9pc to 47.26p.

Credit Suisse forecasts earnings in the industry may be curbed 37pc because of regulatory changes.


"Given the increase in regulatory proposals in recent months we believe that it is helpful for investors ahead of next month's G20 summit to track the impact," London-based Credit Suisse analyst Jagdeep Kalsi wrote.

Separately, New York attorney general Andrew Cuomo has subpoenaed eight banks, including Goldman Sachs and Morgan Stanley, to see whether they misled credit-rating services about mortgage-backed securities.

Xstrata, the world's fourth-largest copper producer, dropped 7.9pc to £10.09.

BHP Billiton, the biggest mining company, fell 4.5pc to £19.14. Rio Tinto, the third-largest, lost 5.5pc to £32.10.


Base metals fell in London, paring a weekly advance on a stronger dollar and amid concerns about the risk to economic growth from European sovereign debt.

BP fell 3.2pc to £5.30 as crude oil fell to a three-month low. The energy company is trying to insert a tube into a leaking pipe at a well off Louisiana, advancing a plan to divert much of the crude into a ship on the surface.

The Stoxx Europe 600 index dropped 3.5pc to 248.37 this week, with France's CAC-40 index down 4.6pc to 3,560.36 and Germany's DAX off 3.1pc at 6,056.71. Shares of aerospace firm EADS, which owns Airbus, rose 5pc even as it reported a 39pc fall in profits for the first quarter to €103m after it was hit by the impact of unfortunate currency hedging.

Spanish airline Iberia -- which aims to complete a merger with British Airways by the end of the year, fell 2.5pc, even as its first-quarter net loss narrowed to €52m from €92.6m. (Bloomberg)

Irish Independent

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