Insurers, Banks Decline in Europe; Ireland Bonds Losses

Marcus Jacob
11 Nov, 2010
New York City

European markets came under pressure after investors face significant losses linked to Ireland related debts and bonds. The loss worries quickly extended to other struggling nations including Spain, Portugal and Greece. Siemens AG lifted its dividend. Telefonica SA fell on weaker earnings.

[R]5:00 PM Frankfurt – European markets came under pressure after investors face significant losses linked to Ireland related debts and bonds. The loss worries quickly extended to other struggling nations including Spain, Portugal and Greece. Siemens AG lifted its dividend. Telefonica SA fell on lower than expected earnings.[/R]

European markets declined as investors focused on the falling sovereign debt values of the smaller nations in the European Union. Weaker revenues outlook guidance from Cisco Systems also weighed on the tech stocks in the region. Resource stocks were active after rising inflation worries were in focus in China trading.

Irish central bank governor Patrick Honohan said at a speech in Dublin that loan losses at domestic and international banks may reach as high as 85 billion euros largely linked to construction industry.

Indexes in Athens, Lisbon, Stockholm and Zurich declined nearly 0.3% and in Milan fell 1%. The DAX index in Frankfurt closed higher after trading down most of the day. The index in Madrid dropped 0.8% and in Dublin plunged 1.2%.

Investors focused on the abilities of Ireland and Portugal to repay sovereign debt and are increasingly bracing for a debt restructuring that may force bond holders to accept partial payment.

The yields spreads of the sovereign bonds of Portugal, Spain, Ireland and Greece jumped to between 500 and 650 basis points to German bonds after French Finance Minister Christine Lagarde commented that investors “must” be a part of debt restructuring.

Bank of Ireland plunged 7.3% to 38.59 euros and National Bank of Greece SA declined 3.2% to 7.24 euros.

Stock Movers

Allianz SA declined 1.5% to 88.40 and Generali SpA and Aviva Plc declined between 2% and 3% on the worries that insurers may be included in the new capital provisions that are discussed by the Basel Committee on Banking Supervision.

Assicurazioni Generali SpA fell nearly 3% after the insurer reported lower than expected third quarter income.

STM Microelectronics NV declined 3% after Cisco Systems guided lower than expected current quarter revenues.

Siemens AG increased 2.6% to 85.34 euros after the company announced the plan to increase the dividend to 2.70 euros.

Telefonica SA declined 1.5% to 18.04 euros after the European telecom company reported lower than expected third quarter earnings of 5.06 billion euros.