Shares fall to 2011 low as recession fears increase

IRISH and European shares fell to near year lows yesterday as gold hit new records as investors sought a safe haven amid fears the US will re-enter recession and Italy and Spain could be frozen out of sovereign dept markets just like Ireland, Portugal and Greece.

European stocks tumbled to the lowest level in 11 months amid concern that a slowdown in the world’s largest economy may derail global growth.

Irish financial stocks fell 3.4%. Bank of Ireland fell 4c to 10.1c. AIB weakened 0.4c to 10.5c. Irish Life & Permanent lost 0.7c to 4.1c, with insurance group FBD Holdings closing down 5c at €6.88.

Gold futures surged to a record $1,645.80 an ounce as escalating concern that the global economy is losing momentum spurred demand for the precious metal as an investment haven. Gold climbed to all-time highs in euro, pounds and Canadian dollars.

National benchmark indexes fell in all 18 western European markets yesterday.

Britain’s FTSE 100 lost 1%, Germany’s DAX fell 2.3% and France’s CAC slid 1.8%.

The Swiss Market Index tumbled 4.1% after reopening following yesterday’s holiday as UBS and Credit Suisse Group sank more than 7%.

Italy’s stock index fell to its lowest in more than 27 months, dragged down by banks with a heavy exposure to Italian debt.

European shares hit a nine-month low amid worries that slowing economic growth will make it even harder to overcome the eurozone’s debt troubles.

“The fear of the market is that the world is going into recession again… and in the eurozone the peripheral markets are the ones that will suffer most,” said Alessandro Giansanti, strategist at ING in Amsterdam.

The Stoxx Europe 600 Index retreated 1.9% to 256.98 at the 4:30pm close in London, the lowest level since August 31.

European stocks yesterday were the first major region to enter a so-called correction, with the Stoxx 600 dropping 10% from this year’s highest level, as falling Spanish and Italian bonds showed the sovereign-debt crisis is spreading.

“There’s a vicious circle between markets and the economy, with poor economic data refuelling negative sentiment,” Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, said.

“There are enough elements on the table to create a nervous environment.”

Additional reporting Bloomberg