European stock prices fell again this morning as the news of the downgrade of Ireland’s credit rating brought the issue of over-indebtedness of eurozone member states back into focus for investors.
The FTSEurofirst 300 index of leading European stocks was down 0.5 percent at 1,014 points at 9:30 AM. Yesterday, it plunged 1.6 percent under the influence of significantly worse-than-expected data on existing home sales in the U.S. The Frankfurt DAX, Paris CAC, and London FTSE indices were down between 0.16 and 0.3 percent at 9:30 AM. The credit rating agency S&P downgraded the rating of Irish government bonds by one notch, from ‘AA’ to ‘AA-‘, citing significant costs associated with providing assistance to struggling financial institutions in the country.
At the same time, the agency assigned a negative outlook to Ireland. The prices of Irish bank stocks fell the most, with Bank of Ireland shares dropping 2.3 percent and Allied Irish Bank shares down 1.9 percent. "Strong corporate earnings reported during the summer overshadowed fears of excessive indebtedness among eurozone member states, but this downgrade is a reminder that these problems have not disappeared," says Christian Jimenez, fund manager at Diamant Bleu Gestion. On the Tokyo Stock Exchange, the Nikkei index fell 1.66 percent to 8,845 points. (H)
