Italian election fears give investors the blues

European shares fell for a second day on Tuesday on fears a new election in Italy – which could become a proxy referendum on its euro membership – might renew the risk of a euro zone break-up.

US stocks tumbled the most in more than a month, joining a global equity sell-off sparked by the concern that Italy’s political woes will destabilise Europe. Treasuries surged, oil plunged and the yen rallied.

DUBLIN

The Iseq fell 0.8 per cent, faring better than many of its European peers. Banking stocks were worst affected, as the financial sector across Europe took a hammering on the fears that Italy could spark a renewed crisis for the European Union.

AIB finished the session down 3.4 per cent to close at €4.81. Bank of Ireland rallied towards the end, but still finished down 2.9 per cent at €7.29.

CRH surge gives concrete boost to Iseq

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Yield on riskiest Irish bank bonds rises as Italian turmoil rattles markets

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Irish Residential Properties REIT finished down almost 1.5 per cent at €1.37 per share, following its agm in Dublin on Tuesday.

Smurfit Kappa fell back more than 2 per cent to €35.86, coming off the record highs on Monday in the midst of the pursuit of the company by US giant International Paper.

Tullow Oil, which maintains its main listing in London, was up more than 5 per cent in Dublin, despite a sharp drop in crude prices.

LONDON

Italy’s political turmoil helped knock £25 billion off the value of the UK’s blue chip index. The FTSE 100 ended the day down 1.2 per cent.

Standard Life Aberdeen fell 9.1p to 350.8p despite confirming that it would return up to £1.75 billion to shareholders following the sale of its European insurance business to Phoenix Group.

As part of the deal, Phoenix will take on the UK mature retail and spread/risk books and the Europe, UK retail and workplace operation, while Standard Life Aberdeen will hold on to the UK retail platforms and financial advice business.

Dixons Carphone was at the bottom of the FTSE 250 as the company warned on profits and revealed plans to close 92 stores. Dixons Carphone said that full year pre-tax profit is expected to come in at £382 million, down from £501 million in 2017. Next year the figure will fall to £300 million, the firm added. Shares fell 48.4p to 185p.

IWG was one of the best performing stocks on the FTSE 250, rising 7.8p to 312.1p on news that the Regus owner has rejected a fifth takeover approach, turning down a cash offer from US investor Prime Opportunities.

EUROPE

The pan-European Stoxx 600 fell 1.4 per cent, with the euro zone’s banks index losing 4.5 per cent, its biggest daily drop since the Brexit vote in June 2016.

Milan’s FTSE MIB tumbled 2.6 per cent.The stress spread to other peripheral euro zone markets, with bourses in Madrid and Lisbon losing 2.5 per cent and 2.6 per cent respectively with bank stocks firmly in the firing line.

Banco Comercial Portugues fell 8.1 per cent, while Spain's Sabadell lost 6.8 per cent. JP Morgan analysts repeated their earlier call for investors to move out of Italian equities and into Germany.

While German government bonds have been acting as a safe haven for investors, with yields on the euro zone benchmark bond falling, Germany’s DAX shed 1.5 per cent as investors fled risky assets.

NEW YORK

The only gainers were shares of consumer staples, utilities, and real estate companies. Shares of energy companies were led lower by a near 2 per cent drop in US crude futures on expectations that Saudi Arabia and Russia could pump more crude to compensate for a potential supply shortfall.

Exxon Mobil fell 0.4 per cent, while Chevron was down 0.3 per cent. Halliburton slipped 1.2 per cent. NXP Semiconductors NV rose 0.6 per cent on a report on Monday that China is ready to approve the Qualcomm NXP deal if the United States lifts ban on ZTE Corp.

(Additional reporting: Bloomberg/Reuters/PA)