Poor AIG results sends markets lower

Heavy losses reported by AIG have sent European markets lower and the Iseq has fallen on the negative sentiment.

At 1.20pm, the Iseq was down 77 points or 1.2 per cent at 6,405.

Smurfit Kappa was among the bigger fallers, shedding 9.5 per cent to €7.76 after the company said margins would come under pressure this year due to the combined impacts of a slowdown in  demand, the weak dollar and cost inflation.

C&C shares were largely flat this morning after it revealed a 37 per cent fall in full-year operating profits to €125.2 million due to a fall in sales of its Magners cider in the UK.

At 1.20pm C&C shares were trading at €4.72.

Among the banking stocks, AIB was off the most, shedding 2.7 per cent to €13.66. It was closely followed into negative territory by Bank of Ireland shares, which dropped 2.4 per cent to reach the midway point at €9.07.

Anglo Irish shares were largely unchanged at €9.69 while Irish Life and Permanent stocks were off 1.2 per cent at €11.20.

The ever-rising cost of oil lead to some selling of airline stocks this morning. As oil broke through the $125 mark Ryanair shares were down 4.6 per cent at €2.86. The stock was also under pressure after Merrill Lynch cut its share-price estimate for the airline by 7.3 per cent. Aer Lingus shares were unchanged at €1.87.

European stocks fell by midday, on track for their first weekly loss in a month, as a hefty loss at US insurer AIG weighed on financials and a record-high oil price hurt the broader market.

The FTSEurofirst 300 index was down 1.7 per cent at 1,337.53 points at the midway point. If sustained until the close, that would be the biggest one-day drop since mid-March and would snap a three-week-long winning streak on the index.

Banks were the biggest negative weight on the index. As well as AIG's $7.8 billion quarterly loss, financials were hurt by the possibility of big asset sales at Citigroup.

Worries about the health of the financial sector combined with a fresh record high in oil prices near $125 a barrel to hit risk appetite, leading to broad pressure on equities.

"(There are) writedowns at AIG and the capital raising, some poor results from European insurers, some stocks downgrades in the financial sector. And the oil price is pretty high, which might be unsettling people a little," said Kevin Gardiner, global equity strategist at HSBC.

Additional reporting Reuters