Stocks fall on uncertainty over Spain

THE DECISION by Spain to seek a €100 billion bailout over the weekend was the focus for all market participants yesterday.

Having rallied in early trade, by midday virtually all equity markets were on a downward trajectory, and Italian and Spanish 10-year bond yields increased by up to 30 basis points. The euro also fell against the dollar, in the first full day of trading since the announcement of the fourth euro zone bailout since the financial crisis began.

DUBLIN

THE ISEQ index of Irish shares finished fractionally lower, having hit highs of 3,102 earlier in the session.

The Dublin bourse yesterday updated its freefloat following the publication of its second quarter figures which showed a 4 per cent rise in revenue for the Irish stock exchange, but a fall in profits, mainly due to a €2 million exceptional charge relating to the closure of its pension scheme. As expected, the implications of the freefloat changes were minor, with 21 seeing upward revisions, 12 down and 13 remaining the same. The changes will take effect from the opening of markets next Monday.

Irish exploration company Fastnet was also admitted to the esm for the first time yesterday. There was little stock specific news of note, yesterday, with macro-events shaping market sentiment.

Having made gains in early trade, construction companies CRH and Grafton fell back in afternoon trading though they were still among the best performers adding 0.8 per cent and 2 per cent respectively.

Paddy Power had a good day, adding a half a per cent to €51.79.

Airlines had a mixed day after the International Air Transport Association (IATA) increased its forecast for losses for the airline sector. Aer Lingus edged up on the day, adding 0.1 per cent to €0.95, while Ryanair lost 1 per cent to close at €3.96.

LONDON

MOST UK stocks declined, erasing gains in the final half hour of trading, as initial optimism over Spain’s bailout plan gave way to concern it won’t stop the debt crisis from spreading.

Severfield-Rowen dropped 6.9 per cent after the supplier of structural steelwork to Heathrow Airport and the Shard skyscraper in London said full-year profit may be lower than expectations, citing operational overruns of £1.6 million on two “complex projects” in the UK.

Eurasian Natural Resources fell after RBC Capital Markets cut its recommendation on the stock.

Lloyds Banking Group gained 1.7 per cent.

The FTSE 100 Index lost less than 0.1 percent to 5,432.37 at the close in London, after earlier rallying as much as 1.9 per cent. Fifty nine shares on the gauge slid, while 41 rose. The FTSE 100 has retreated 8.9 per cent from this years high on March 16th.

The number of shares changing hands on FTSE 100 companies was 9 per cent more than the average of the last 30 days.

EUROPE

EUROPEAN STOCKS erased gains in the final hour of trading, led by a selloff in Spanish and Italian lenders, as optimism faded that Spain’s €100 billion bank bailout will contain the sovereign debt crisis.

Banco Santander and Banco Bilbao Vizcaya Argentaria erased gains after Fitch Ratings Services downgraded Spain’s two biggest lenders. UniCredit and Intesa Sanpaolo both tumbled more than 5 per cent as bond yields rose. Volkswagen paced advancing shares. The Stoxx 600 was little changed at 241.92 at the close of trading after rallying as much as 1.9 per cent earlier.

The Stoxx 600 initially rallied as the markets digested the news of the Spanish bailout.

National benchmark indexes fell in 12 out of 18 western European markets. Germany’s DAX climbed 0.2 per cent, the UK’s FTSE 100 slipped 0.1 per cent and Frances CAC 40 slid 0.3 per cent.

Italy’s FTSE MIB dropped 2.8 per cent, the biggest decline since May 23rd.

US

US STOCKS fell while the euro and commodities erased early rallies as optimism over Spain’s bailout plan gave way to scepticism. US treasuries advanced as investors increasingly turned to perceived “safe havens”.

The Standard and Poor’s 500 Index lost 0.2 per cent to 1,323.22 at midday, New York time, after climbing as much as 0.7 per cent in the first minutes of trading.

Telephone and utility companies gained the most among US equities. Apple rallied as it prepared to use its developers’ conference to debut a fresh lineup of computers and software tools.

Hewlett-Packard, Bank of America and Microsoft lost more than 1 per cent.

Oil fell on scepticism that Spain’s bailout plan will succeed in easing the euro region’s debt crisis. Futures dropped as much as 1.2 per cent and crude oil for July delivery slipped 64 cents, or 0.8 per cent, to $83.45 a barrel by lunchtime in New York. – (Additional Reporting: Bloomberg)