More than €4bn wiped from Dublin market

Global stock markets were routed yesterday amid investor concern over slowing global economic growth and worries about the health of banks in Europe and the US.

In Ireland, more than €4 billion was wiped from the value of shares, with the Iseq Overall index closing down 5.4 per cent. This was its worst performance since August 24th, 2010, a time when the domestic banks were knee-deep in restructuring and just two months before the Government began talks on a bailout with the IMF and the EU.

The pan-European FTSEurofirst 300 index closed down 3.4 per cent at 1,239.68 points, its lowest since October 2013.

FTSE falls

In London, more than 90 of the FTSE 100 experienced falls in their share prices. Wall Street sank sharply as financial stocks sold off amid worries about interest rates, and investors backed off from richly valued tech and consumer stocks amid persistent fears of a global slowdown.

The technology-heavy Nasdaq Composite fell 2.5 per cent to its lowest since October 2014, weighed down by Microsoft, Amazon and Facebook, stocks that gave strength to the market last year.

Financial stocks were at the forefront of a heavy sell-off in US and European equities as persistent concerns about the health of the global economy, coupled with worries about the impact of negative interest rates, triggered a broad-based flight from risky assets.

The STOXX Europe 600 banking index fell 5.6 per cent, making it the top sectoral faller. The index is down around 24 per cent so far this year on concerns about banks’ profitability and capital strength in an environment where monetary stimulus continues to put pressure on margins.

“Investors are starting to think that banks are not as solid as previously thought,” said Giuseppe Sersale, a fund manager at Italy’s Anthilia Capital.

He added the negative sentiment was compounded by signs of a US economic slowdown, persistent worries about China, and continued volatility in oil prices.

The cost of insuring the European financial sector’s senior debt against default climbed to its highest level since late 2013.

Deutsche Bank and Commerzbank both fell 9.5 per cent, while BofA-Merrill Lynch, Goldman Sachs and Morgan Stanley were all down more than 5 per cent.

Irish banks down

Bank of Ireland’s shares lost just under 10 per cent, with the bank shedding €906 million of its value. It is due to publish its full-year results on February 22nd.

It emerged yesterday that the bank had approved €5.3 billion in new credit to Irish SMEs last year, an increase of about 18 per cent on 2014.

Permanent TSB, which is 75 per cent owned by the State, finished 9.4 per cent lower.

Ironically, AIB’s shares finished 3.7 per cent higher but this is a meaningless indicator as the company is more than 99 per cent owned by the State and there is no trading in the shares by institutions.

Noel O’Halloran, chief investment officer with Kleinwort Benson Investors, said the environment for an IPO of 25 per cent of AIB this year was now “more challenging”.

“If the markets stay as they are, it’s going to be very difficult,” he said. “Valuation will be a challenge for AIB.”

In spite of weakness in global markets in the first six weeks of this year, Mr O’Halloran expects markets to calm in the second quarter. “I think the underlying global economy is strong and central banks are on the case.”

No sector was immune from the “bloodbath” in Dublin. CRH finished 8 per cent lower at €21.14, while Cavan-based construction stock Kingspan closed down 10 per cent.

Travel groups Ryanair and Irish Continental Group both dropped by 5 per cent while bookmaker Paddy Power Betfair shed 5.7 per cent. Food and drinks companies Aryzta, C&C, Glanbia and Kerry Group all finished the day down.

Renewed weakness for oil prices, plus lingering uncertainty over the outlook for US monetary policy added to the nervous tone yesterday, boosting “core” government bonds, gold and the yen.

– Additional reporting: Reuters Bloomberg and Financial Times