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Markets Tumble on Italian Contagion Fears - Latest Market Analysis

A premature meeting of senior EU officials pushed equity market lower early Monday amid heightened fears that Italy is becoming engulfed in the European sovereign debt crisis. Many interpreted the assembly as an emergency meeting, following a large Italian sell off last week which the Italian media has termed “Black Friday”. Italian 10 year bond yields rose to a eurozone high of over 5.5% today, highlighting fears over the nation’s debt to GDP ratio which, at 120%, is secondly only to Greece among the eurozone nations. Unlike the periphery however, Italy represents an insurmountable bailout challenge, a fact that augments concerns surrounding recent political instability and bank stress tests.

European markets, which have a greater exposure to European sovereign debt, saw steep declines with the DAX and the CAC 40 finishing the day 2.3% and 2.7% lower respectively. The FTSE closed down 1%, lead by BSkyB which looks increasingly less likely to be taken over by the troubled News Corp. Banking stocks were also noted for their declines; Lloyds, RBS and Barclays all lost close to 4%. In a theme that has become familiar of late, risk assets suffered as investors fled to safer heavens.

Locally, shares in Northumbrian Water finished up 5.3% to 449p after Cheung Kong Infrastructure Holdings confirmed its 465p per share bid. In stark contrast to the utility, shareholders in the beleaguered care home operator Southern Cross discovered today that shares in the company have been suspended from trade by the FSA. The move follows a restructuring update by the company stating that it is to cease being the operator of its homes at the end of its restructuring period. Plans were outlined for all landlords to leave the group, with around 250 homes being immediately transferred to other operators, and the balance of landlords finalising their plans. The news came as a surprise to shareholders who were hoping for an arrangement under which the group would continue operating most of its homes, but who have instead learnt that “little or no value will be attributable to shareholders”.

This was posted in Bdaily's Members' News section by John Dance .