Values fall in Europe over debt relief

STOCKS FELL across Europe yesterday after Germany, Finland and the Netherlands said that EU states such as the Republic and Spain should bear the legacy cost of their banks, even if the European Stability Mechanism bails them out.

The news subjected markets to a new wave of volatility, weakened the euro and sent Irish and Spanish bond yields back up.

Along with the announcement that three nations only want the ESM to assume a limited share of the burden of recapitalising banks, there were other factors at play as well.

The Bank of Spain said the economy kept falling at a “significant pace” in the third quarter while reports showed new US home sales came in behind market expectations.

“There’s an ongoing drip feed of negative news,” said Richard McGuire, a fixed-income strategist at Rabobank International in London.

DUBLIN

MADISON DEARBORN’S sale of half its stake in Smurfit Kappa for €140 million – €8 a-share – was the big news in Dublin yesterday, but the market lost ground in parallel with the rest of Europe.

Irish bond yields began reversing their recent falls and ticked back up as investors reacted to the news that the State is likely to be left with much of the debt burden for recapitalising the banks.

The benchmark nine-year bond yield was up 0.112 per cent at the close of business. The five-year bond was up 0.292 per cent at 3.884.

The yield – the difference between the interest charged on Irish and German sovereign debt – had been falling since the first week of this month, when the European Central Bank (ECB) announced that it planned to buy troubled euro zone countries’ bonds.

Yesterday’s closing yield on the benchmark nine-year bonds was still below the 5.48 per cent recorded the day after the ECB announcement.

Elsewhere, Smurfit Kappa closed at €7.90, 2.47 per cent off its close, after it emerged that one of its biggest shareholders, Madison Dearborn, sold half its 15 per cent stake at €8.

Index heavyweight, building materials group CRH drifted, closing 0.53 per cent off at €15.115, which traders said was a good performance considering general sentiment and the poor US housing data.

Food group Glanbia which has enjoyed a good run of late, ended the day 2.73 per cent down at €6.76.

LONDON

SHARES IN London’s blue-chip index fell the most in two months, with miners taking a big hit as commodity prices tumbled.

Anglo American declined 3.7 per cent to 1,831 pence after saying that it plans to cut coal production in the short term.

BHP Billiton, the world’s biggest mining company, retreated 2.4 per cent to 1,908 pence. Rio Tinto, the third-largest, dropped 3.4 per cent to 2,841 pence. Copper, lead, nickel and tin fell in London trading.

Imagination Technologies, which designs parts for Apple’s iPhone, slumped 9.6 per cent to 470 pence, the lowest price in two months, after Texas Instruments said it will spend less on its products for smartphones and tablet computers.

BAE Systems dropped 2.6 per cent to 319.7 pence after a German lawmaker questioned the company’s proposed merger with European Aeronautic, Defence Space Co.

EUROPE

EUROPE’S BENCHMARK index also had its biggest drop in two months.

Spanish builders and bankers took a big hit. Acciona slumped 9.9 per cent to €45.09, its biggest tumble since November 2008, while Actividades de Construccion Servicios SA, Spain’s biggest construction company, lost 5.8 per cent to €15.97. Obrascon Huarte Lain SA slid 5.3 per cent to €18.51. Ferrovial SA declined 4.9 per cent to €9.70.

Santander sank 4.5 per cent €5.92, while Banco Bilbao Vizcaya Argentaria SA declined 4.8 per cent to €6.20.

Technip SA, Europe’s second-largest oilfield-services provider, retreated 2.4 per cent to €86.86. Statoil ASA dropped 2.8 per cent to 149.20 kroner. Norway’s national oil company was cut to sell from buy at Nordea Bank AB.

US

US STOCKS fell for a fifth day, sending the Standard Poor’s 500 Index to its longest retreat since July, as concern grew that Europe’s debt crisis is worsening.

Apple fell for a third day, losing 0.7 per cent to $668.92, after earlier this week reporting debut weekend sales for the iPhone 5 that fell short of some analysts’ estimates because of supply constraints. The shares are down 4.5 per cent over three days. Jabil Circuit slid 9.5 per cent, the most in the SP 500, to $18.98. The electronics supplier forecast first-quarter earnings will be no more than 62 cents a share, missing estimate of 67 cents. – Additional reporting by Bloomberg