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Stocks fall across the world as fears grow of US default

IRISH shares fell again yesterday as markets across the world plunged on concerns that US lawmakers will not be able to resolve their debt crisis.

The ISEQ Overall Index slumped to close at 2,852.4, for a daily loss of 1.31pc, or 37.79 points. The index has now fallen nearly 3pc since it opened on Monday.

Traders in Dublin and across the globe were increasingly jittery about the ongoing crisis in the United States, where the Republican-controlled House of Representatives is still refusing to raise the debt ceiling, thereby risking a US default on its debts -- something that President Barack Obama has warned could precipitate a catastrophic crash in the world economy.

"The likelihood of a US sovereign-rating downgrade is around 50pc," said Andrew Garthwaite, the London-based head of global equity strategy at Credit Suisse.

"If there is no increase in the debt ceiling for a prolonged period -- say three months -- with no agreement in sight, we believe stock markets could easily fall 15pc."

Here, the banks all fell, as Irish Life & Permanent's nationalisation was confirmed. IL&P tumbled 13.04pc. The Government's stake in Bank of Ireland is set to fall to around 15pc, but, even with that news, BoI closed 7.34pc lower at 10c, while Allied Irish Banks fell 7.5pc to 12c.

The problems in the US were enough to drive down construction giant CRH, which fell again, this time closing off 1.61pc at €13.75.

Overall, there was little good news on the index, although Elan climbed 0.94pc to €8.60 after the pharmaceuticals company reported strong second-quarter results, mostly on the back of its multiple sclerosis drug, Tysabri.

Donegal Creameries added 4.86pc to close at €3.88.

The ISEQ's woes reflected a wider malaise across Europe yesterday. National benchmark indices fell in all 18 western European markets.

The benchmark Stoxx Europe 600 slid 1.1pc, while the UK's FTSE 100 fell 1.2pc, Germany's DAX lost 1.3pc and France's CAC declined 1.4pc.

"The earnings season has revealed that weakness in the global economy remains," said Philippe Gijsels, the head of research at BNP Paribas Fortis Global Markets.

"There have been some misses in terms of guidance and this shows us that we're in a mid-cycle slowdown, with companies being held hostage by economic conditions."

Profit has missed analyst estimates by an average of 3.3pc for companies in the Stoxx 600 that have reported their results since July 11.

Peugeot lost 7.6pc after Europe's second-largest carmaker abandoned a goal of increasing second-half earnings at the automotive division.

Bank stocks posted the biggest decline among 19 industry groups on the Stoxx 600.

Santander retreated 3.2pc as second-quarter profit dropped 38pc after Spanish loan provisions surged.

UniCredit, Italy's largest bank, fell 4.3pc.

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