US gains fail to boost activity in ISEQ market as it drops 3.5%

IN A mixed day for the markets that opened higher yesterday afternoon after struggling investment bank Lehman Brothers announced plans to sell assets to shore up its finances.

Earlier the investment bank had reported third-quarter losses of close to $4 billion (about €2.8bn).

The bank’s results were brought forward by a week after the bank’s shares fell by 45% on Wall Street on Tuesday.

Lehman was badly damaged by the US housing crisis and credit crunch and has been looking to raise funds to help rebuild its financial position.

Despite that hangover from the credit crunch, the Dow Jones rose 54 points to 11,285 and the Nasdaq climbed 20 to 2,229 in early trading yesterday.

However the US gains failed to bolster activity in the ISEQ 100 in Dublin and the market was off more than 3.52% on the day wiping out more than half of Monday’s near 7% gain.

Big losers included AIB and Bank of Ireland which lost 7.4% and 6.4% respectively.

Anglo and Irish Life & Permanent were down by more than 5% each as investors were undermined by the awful circumstances that have gripped Lehman, as a result of the credit crunch which continues to undermine key planners in the US banking sector.

Kingspan lost more than 5% of its value while McInerney, with exposure to both the Irish and British markets fell 3% while CRH, which is heavily invested in the US fell only marginally on the day.

Across Europe bank shares fell after the Lehman news.

European markets are under selling pressure, with London’s FTSE down 1.0%, Franc’s CAC down 0.5% and Germany’s DAX falling 0.6%.

Matters were not helped by reports in the Wall Street Journal yesterday that the EU cut its growth forecast, predicting that Britain, Spain and Germany will enter a recession.