Iseq falls over 1% as banks give up gains

The Dublin market was down over 1 per cent by mid-afternoon as banks continued to surrender the gains that followed the US government bail out Fannie Mae and Freddie Mac last weekend.

At 12.38pm, the Iseq index of Irish shares was 1.1 per cent lower at 4,347, a fall of 51 points, following on from yesterday's 3.5 per cent fall.

Leading the way down was Bank of Ireland which saw its shares drop over 5.6 per cent to €5.21, while Anglo Irish Bank saw its shares dip 2.7 per cent €5.21.

Analysts said a cut in earnings estimates for 2009 and 2010 by Dresdner Kleinwort on concerns over bad debt capital shortfalls had weighed on the financials.

Dresdner reduced its 2009 earnings-a-share estimate on AIB, Bank of Ireland and Anglo Irish Bank by an average of 33 per cent for 2009 and by an average of 26 per cent for 2010.

AIB shares were trading at €8.01, down 1.1 per cent by mid-afternoon close to the close last Friday. Irish Life and Permanent was almost 3 per cent lower at €6.60.

Outside the banks weak data from the Home Retail Group in Britain which operates the Argos and Homebase stores failed to cheer the market while Fyffes' warning of a difficult second-half of the year in its interim trading statement saw its shares trade 1.4 per cent lower at €0.34.

With the Irish market being led recently by events in the US, brokers said the open of trading there was likely to give the Iseq some direction.

European stocks fell for a third day as concern deepened the economic slowdown will hurt earnings for retailers and financial firms, overshadowing a rebound in mining and oil shares.

US index futures and Asian shares also declined.

Home Retail Group Plc sank 6.1 per cent after the home-improvement chain reported lower sales. William Morrison Supermarkets tumbled the most in eight months after chief executive officer Mark Bolland said he expects "a tough second- half".

Europe's Dow Jones Stoxx 600 Index lost 0.7 per cent to 275.34 as of 12.07pm in London, extending this year's drop to 25 per cent.

Futures on the Standard & Poor's 500 Index fell 0.8 per cent, and the MSCI Asia Pacific Index decreased 2.5 percent.

"Economies around the world are clearly slowing," said Jeremy Beckwith, London-based chief investment officer at Kleinwort Benson, which oversees the equivalent of $13.1 billion.

Additional reporting agencies