RENEWED FEARS about European sovereign debt and banks’ ability to raise funds dragged stocks down yesterday.
France kicked off what is expected to be a three-month round of bond auctions by euro zone governments by raising close to €10 billion yesterday.
The country’s lenders charged an average 3.29 per cent interest from 3.18 per cent a month ago, indicating a small decline in confidence in its ability to pay its debts.
Traders in Dublin pointed out that while the auction was over-subscribed, France has €53 billion of debt to roll over this month, so yesterday’s transaction was just the start.
Overall, euro zone nations are expected to borrow more than €260 billion over the first three months of this year. At the same time, there are ongoing fears about the zone’s banks’ ability to raise cash themselves.
Europe’s woes eclipsed more good news from the US, where, once again, jobs figures were better than expected, providing another sign the world’s biggest economy may be recovering.
DUBLIN
In Dublin, a good run for the market’s biggest stock, building materials giant, CRH, came to an end. The group, which accounts for around one-third of the Iseq index of Irish shares, tumbled 2.62 per cent to close at €15.075.
Dealers said a number of research notes published yesterday, including one from Credit Suisse, suggested that both it and one of its larger rivals, Heidelberg, were over-priced.
At the same time, investors were seeking to take some of their profit from its recent strong run.
CRH was one of a number of European stocks that investors began buying last month to cash in on the positive signs emanating from the US. Around half the group’s revenues come from there.
Paddy Power also saw some investors taking profit, and slipped by close to half a per cent to end the day at €44.55. That stock has also fared well recently, particularly since the US administration suggested it may lift or ease the ban on online gambling.
Drinks group CC was strong yesterday as investors warmed to the view that it had been oversold recently. The stock added 2.42 per cent to close at €2.878.
“It was trading 30 per cent below its peers and has the best balance sheet in the sector,” one Dublin trader said yesterday.
LONDON
Britain’s blue-chip share index closed lower yesterday amid the growing fears that euro zone countries and banks could struggle to tap markets this year.
The FTSE 100 dropped 44.19 points, or 0.8 per cent, to close at 5,624.26, in tandem with most European indices and the euro itself, after the French debt auction, though oversubscribed, failed to allay fears about the debt crisis on the continent.
Vedanta was the top blue-chip faller, dropping 5.2 per cent as miners tracked a decline in copper prices, which depend heavily on economic activity.
At the other end of the table was Eurasian, which rose 4.6 per cent on volume more than two times its 90-day average on news it will receive $1.25 billion from Canada’s First Quantum Minerals to end a dispute over a project in the Democratic Republic of Congo.
EUROPE
The Stoxx Europe 600 Index fell 0.9 per cent to 247.39 at the close of business. The banks were the worst performers, losing 3.2 per cent as a group. Deutsche Bank, Germany’s largest lender, tumbled 5.6 per cent to €27.97 – its biggest drop since November – as fears spread that both it and other big European financial institutions will have to raise more capital this year.
Banco Santander and Banco Bilbao Vizcaya Argentaria, Spain’s biggest lenders, declined 4.5 per cent to €5.53 and 5 per cent to €6.30, respectively, after the Financial Times cited economy minister Luis de Guindos as saying banks will have to allocate as much as €50 billion in further provisions for “troubled” real-estate assets.
Société Générale, France’s second-largest lender, fell 5.4 per cent to €16.08 after saying it will cut about 1,580 jobs at its corporate and investment bank, about 10 per cent of the unit’s staff.
Petrofac Ltd, the UK oil field-services provider, advanced 1.9 per cent to 1,493p after agreeing with Schlumberger Ltd to co-operate on production projects.
US
US stocks rose as employment figures published yesterday were better than expected.
American companies added 325,000 workers in December, more than economists had forecast, adding to evidence the labour market was gaining momentum heading into 2012. New applications for unemployment aid fell by 15,000 to 372,000 in the week ended December 31st.
The S&P 500 climbed 0.2 per cent to 1,276.23 at midday New York time, after tumbling as much as 0.9 per cent earlier. Bank of America, JPMorgan Chase and SunTrust Banks rose at least 2.5 per cent. – (Additional reporting, Bloomberg/Reuters)
