THE IMMINENT prospect of France losing its coveted triple-A credit rating weighed on equity markets yesterday, dragging European shares down to a two-week closing low.
Investor sentiment also suffered amid fears the euro zone crisis will curtail global growth, with the result the main indices in Europe closed down between 1.7 and 3.3 per cent.
However, the declines were also the result of thin volumes in the market – those investors who chose to flee to safety found there were few buyers on the other side of the trade, pushing equity values down.
DUBLIN
The Iseq index slightly outperformed the main European indices, finishing the day down 1.5 per cent. However, it was a day of decline for some of its heaviest hitters, including cement-maker CRH, which fell 3.4 per cent to €13.18, and Ryanair, which ended the session down 1.7 per cent at €3.73.
Paddy Power, which announced a three-year deal with the British Columbia Lottery Corporation, fell 32 cent to €39.49.
Bank of Ireland dropped 4.65 per cent to 8 cent, while AIB fell 5.3 per cent to 7 cent on a day when European banks fell sharply on concerns about the knock-on effects of a possible downgrade of France.
Independent News Media, which later announced it has spent up to €1.6 million on the English language school International House Dublin, slipped 1 cent to 21 cent.
Among the main climbers, industrial holdings group DCC managed an 8 cent rise to €18.51, while pharmaceutical group United Drug advanced 2.5 per cent to €2.05, and fruit distributor Fyffes rose 2.6 per cent to 39 cent.
LONDON
Stocks in Britain sank the most in three weeks, led by a sell-off in mining companies, after the US Federal Reserve refrained from announcing additional measures to bolster the world’s largest economy. The benchmark FTSE 100 Index dropped 123.35, or 2.3 per cent, to 5,366.8 at the close in London.
Barclays slid 4.7 per cent to 170.3 pence, Royal Bank of Scotland Group lost 4.4 per cent to 19.50 pence, and HSBC Holdings fell 2.5 per cent to 480 pence.
Computer services provider Logica sank 16 per cent – the most in nine years – to 62.1 pence after the company reduced its full-year revenue growth forecast.
Elsewhere, Thomas Cook Group slipped 2 per cent to 14.52 pence after Europe’s second largest tour operator posted an annual net loss of £521 million. The company plans to close about 200 UK shops and scale back its plane fleet.
SuperGroup plc gained 7.2 per cent to 538.5 pence after the owner of the Superdry fashion chain said it has resolved capacity shortages at a warehouse that affected product availability.EUROPE
The pan-European FTSEurofirst 300 index of top shares closed 2.1 per cent down at 952.42 points, after extending losses in the afternoon on trader talk that France is set to lose its triple-A rating.
French lenders Societe Generale, BNP Paribas and Credit Agricole fell between 6.7 per cent and 8 per cent.
Adding to concerns over French banks’ solidity, Credit Agricole said it would record a €2.5 billion loss this year, chiefly due to writedowns in its investment banking unit, and that it would not pay a dividend in order to retain its capital.
France’s CAC 40 was the worst performer among major European indexes, falling 3.3 per cent,followed by Italy’s FTSE MIB, which dropped 2.8 per cent.
The Italian government had to pay a euro-era record yield in an auction yesterday morning in a sign investors are far from convinced that measures taken so far will be sufficient to end the European crisis.
Sentiment had already been dented by overnight comments from the US Federal Reserve, which warned the euro zone situation could curb growth in the world’s largest economy, although it stopped short of announcing fresh stimulus measures.
US
US stocks fell for a third day and hit their lowest level in two weeks as widespread risk-aversion sent commodity prices tumbling.
Weak commodity prices sparked a sell-off in the energy and materials sectors. Eight of 10 SP 500 sectors were down, led by energy. The SP 500 fell below its 50-day moving average in early trading, which could be a portent of more losses.
Investors were also disappointed the Federal Reserve made no mention of possible new stimulus measures after its Tuesday meeting.
Shares of First Solar, a maker of solar power systems, tumbled 19.3 per cent to $34.36 in early trade after it cut its 2011 sales and profit forecast for the second time in two months and said profits year would miss Wall Street’s view. First Solar joins a list of companies, including Intel, Dupont and Texas Instruments, that have cut their outlooks. – (Additional reporting: Bloomberg / Reuters.)
