Dow Jones: 12,422.06 (-0.39%) Nasdaq: 2,710.67 (-0.51%) SP 500: 1,289.09 (-0.49%)THE EURO and world stocks dropped yesterday after news reports of possible credit downgrades of euro zone countries and a lacklustre sale of Italian debt.
A senior euro zone government source said credit rating agency Standard & Poor’s is set to downgrade several euro zone countries, although not Germany.
French television channels, citing a government source, said Standard & Poor’s was to downgrade France’s credit rating. However S&P declined to comment on the reports.
The downgrade speculation dominated market activity throughout the session yesterday, with most European stock markets ending the week in the red.
The Stoxx 600 had earlier advanced as much as 0.7 per cent after Italy sold €4.75 billion of bonds, its maximum target.
Italy’s three-year debt costs fell below 5 per cent but its first bond sale of the year failed to match the success of a Spanish auction the previous day, reflecting the heavy refinancing load which Rome faces over the next three months.
Italy raised the maximum planned amount of €4.75 billion at the auction but did not live up to market expectations raised by a Spanish tender on Thursday, where Madrid raised €10 billion, twice the planned amount, at lower rates.
DUBLIN
Trading was relatively light, however, some sectors, such as construction and banking, performed well.
Although it finished the session only marginally higher, CRH continued its relatively good run of late, with its US exposure seen as a key advantage for the stock, as the US economy shows signs of recovery.
A positive half-year update from UK builder Barratt Developments also helped the sector as a whole.
Grafton, which owns the Woodies, Chadwick and Atlantic Hardware brands, continued to benefit from its positive update on Wednesday, which highlighted an upturn in performance in the final two months of 2011.
This is expected to be mirrored in Kingspan’s forthcoming results.
Grafton and Kingspan were two of the best performers yesterday on the Dublin market, advancing 2.5 per cent and 1.3 per cent respectively.
Financial stocks were also well-bid. Bank of Ireland saw significant buyer interest yesterday, closing up 6 per cent. Irish Life & Permanent also rose, adding 11.5 per cent to finish at €0.029.
LONDON
The FTSE 100 closed down 0.66 per cent, at 5,625.0, off an earlier low of 5,583.45 which was plumbed in initial reaction to the reports of euro zone ratings cuts, taking its weekly fall to 0.2 per cent.
“I don’t think people are ready yet to throw in the towel,” Phil Roberts, chief European technical strategist at Barclays Capital, said.
Strong banks limited the FTSE 100’s losses, led by a 4.8 per cent rise from Royal Bank of Scotland, which announced a major restructuring on Thursday.
Tesco shed a further 2.1 per cent, having plunged 16 per cent the previous session after the retailer’s unprecedented profit warning, as a number of brokers issued downgrades.
Among them, UBS cut its rating on the stock to “neutral” from “buy”, while Credit Suisse’s recommendation moved to “neutral” from “outperform”.
Trading volume in Tesco was robust, at almost six times its 90-day daily average, with volume on the FTSE 100 at only one and a half times.
A profit warning also heaped pressure on midcap engineer Invensys, with the shares down more than 19 per cent after the company said its results would be hit by higher costs in its rail division and in work on Chinese nuclear reactors.
EUROPE
European stocks declined for a third day, with the benchmark Stoxx Europe 600 Index trimming a weekly advance.
National benchmark indexes declined in 15 of 18 western European markets.
France’s CAC 40 Index slipped 0.1 per cent, while Germany’s DAX Index lost 0.58 per cent.
In terms of individual stock performance, Vodafone led losses, falling to a three-week low. Novartis dropped after saying it would take $1.22 billion of charges. and Invensys slumped nearly 20 per cent after revealing £60 million in additional costs.
Commerzbank rose after German newspaper Handelsblattreported that the lender would raise its capital without seeking government aid.
US
Stocks retreated, snapping a four-day rally for the Standard & Poors 500 Index, as euro zone governments braced for credit downgrades by S&P and after JPMorgan Chase’s profit slumped 23 per cent.
JPMorgan bank dropped 2.5 per cent. Bank of America, Intel and Alcoa lost more than 1.3 per cent to pace declines among the biggest companies.
Eastman Kodak tumbled 23 per cent as it is said to be in talks with Citigroup to provide bankruptcy financing. – (Additional reporting: Reuters/ Bloomberg)
