US discord worsens shares slump
IRISH shares tumbled yesterday along with the rest of Europe, although this time it was problems in the US rather than Europe that dominated sentiment on the day.
By the 4.30 close, the ISEQ Overall Index had fallen 1.84pc, or 47.87 points, to 2559.24.
It was a volatile day with the index slumping from early on, but instead of there being any recovery when the US opened, the slump only accelerated.
The crisis in the eurozone took a back seat as news emerged from Washington that the so-called 'Super Committee' on budget-cutting had failed to agree on where the cuts will be made. That sent stocks across the globe into a tailspin and Ireland suffered as much as anywhere else in Europe.
The problems inevitably hit CRH, which gains around half its revenue from its North American operations. The share closed down 2.03pc at €12.54.
The sell-off was reflected in commodities, with Brent Crude dropping 1.19pc to $106 while metals also fell. That helped push most commodity companies lower on the session. Dragon Oil closed down 2.7pc at €5.84, while miner Kenmare Resources lost 11.72pc to close 37c. Petroneft, Petroceltic and Providence Resources all closed lower.
Packaging firm Smurfit Kappa was the main laggard among major stock, closing off 5.13pc at €4.14. Containerboard prices fell last month, indicating a lower price for Smurfit's corrugated products.
Elsewhere, European stocks dropped for a third day as the failure of the 'Super Committee' raised the prospect that the world's largest economy could face another credit downgrade.
National benchmark indices retreated in all 18 markets in western Europe. France's CAC 40 Index slid 3.3pc and Germany's DAX Index lost 3.1pc. The UK's FTSE 100 Index dropped 2.4pc. Greece's ASE Index sank 3.7pc as new prime minister Lucas Papademos met EU President Herman Van Rompuy and EU Commission President Jose Barroso in Brussels. The Stoxx Europe 600 Index dropped 3.1pc.
"The US budget situation is a further drag on sentiment," said Paul Coffin, a fund manager at Fieldings Investment Management in London. "The market is still being dominated by the European situation. The US budget is probably secondary to the eurozone's problems."
KBC led bank shares lower, slumping 12pc in Brussels, as the three-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, widened for a sixth day and bond yields climbed in Spain, Italy and Belgium.
Commerzbank plunged 6.4pc, BNP Paribas slid 3.8pc and Barclays dropped 5.1pc.
Shares also fell as Moody's warned that rising French bond yields increased the fiscal challenges facing the nation with "negative credit implications".