Shares in Europe hit as fear takes hold

SHARES across Europe took a hammering yesterday with Irish stocks losing 1.5% of their value, rounding off a turbulent week on the markets.

In Britain stocks fell for a sixth day as the FTSE 100 Index recorded its biggest weekly loss in almost three years.

European stocks retreated, with the benchmark Stoxx Europe 600 Index posting its biggest weekly loss since November 2008. The Stoxx 600 slipped 1.8% to 238.88 at the close in London, extending its weekly drop to 9.9%.

“The markets want to see a solution that is sustainable in Europe,” said Markus Steinbeis, head of equity portfolio management at the Unterfoehring, Germany-based unit of Pioneer Investments KGmbH, which oversees about $221 billion globally. “The European Monetary Union is facing the risk of collapsing. The market is afraid of a recession. There’s a point where sentiment is collapsing and maybe this point is right now.”

A report yesterday showed that the US economy added 117,000 jobs in July and the unemployment rate dropped to 9.1% as a result.

On the back of this good news the VStoxx, a measure of volatility in European stocks, climbed for an eighth day, heading for a weekly gain of 32%, its largest rally since May 2010. This, however, was lower than expected.

David Thebault, head of quantitative sales trading, at French broker Global Equities said: “The payrolls weren’t that bad and it prevented the VSTOXX from jumping over the threshold of 40 which would have sparked real panic selling.

“It might buy the market some time, until we realise that actually, big US companies aren’t hiring at all. That’s when the market will really fall.”

In Ireland Bank of Ireland fell 6.5% to 9 cent while Irish Life and Permanent plunged 25% to 3 cent. CRH however was up 6.6% to €12.21.

Kerry Group was down 2%, at €25.80 while Paddy Power fell 3.5% to €30.88.

“Investors are pleased with the better-than-disastrous jobs data to take some of the pain out of the market carnage,” said Daniel Weston, a portfolio adviser at Schroeder Equities GmbH in Munich.

“Jobs still aren’t being added fast enough to make a dent in the unemployment rate, but today’s market bounce will provide a good opportunity for bears to sell into some strength.”

Picture: A broker playing Patience at the Madrid Stock Exchange yesterday