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03rd of October 2010
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September 30, 2010    

Irish government to take majority stake in Allied Irish Banks

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by Elaine Frei
Irish government to take majority stake in Allied Irish Banks

Most European equities markets were lower Thursday on bad news for banks in Ireland, and were not even helped by new data from the United States which showed that new jobless claims were down by 16,000 last week, more than had been predicted by analysts, or by a revised report that showed that the US gross domestic product grew at a revised 1.7 percent annual rate in the second quarter.

The bad news from Ireland was that the central bank there said that both state-owned Anglo Irish Bank and Allied Irish Banks (ISEQ: ALBK) will likely need extra capital to stay afloat, and after Ireland’s finance minister said that it will take a majority share in Allied Irish because no private transaction to save the bank was possible considering the present state of the economy.

Allied Irish Banks was down as much as 28 percent during the day on the announcement, but Bank of Ireland (ISEQ: BKIR) added 8.8 percent.

The FTSE 100 was 0.37 percent lower to 5,548.62 in London, while the FTSE 250 dropped 0.29 percent to 10,531.8.

Banks were mostly lower in London, led by a 2.92 percent decline for Standard Chartered (LSE: STAN), while only Lloyds Banking Group (LSE: LLOY) managed a gain, and then only added 0.05 percent.

Investment managers Man Group (LSE: EMG) had the best day on the 100, adding 2.77 percent, while engineering group Senior (LSE: SNR) added 8.22 percent on positive broker comment, for the biggest gain on the 250.

The biggest decline on the 100 came from food service and catering company Compass Group (LSE: CPG), which fell 3.81 percent after its forecast for full-year sales growth were not up to broker estimates, while emergency home repairs group Home serve (LSE: HSV) dropped 6.53 percent for the worst day on the 250.

Supermarket groups did poorly, with both Tesco (LSE: TSCO) and Wm Morrison Supermarkets (LSE: MRW) among the top five decliners on the 100, dropping 2.14 percent and 2.12 percent respectively.

The FTSE Eurofirst 300 was 0.17 percent lower to 1,063.11 while the Dax fell 0.29 percent to 6,229.02 and the CAC-40 dropped 0.59 percent to 3,715.18, but the IBEX managed to add 0.26 percent to 10,514.45 in Madrid.

Markets in the Asia-Pacific region were mixed, with more seeing declines than gains, as worries continued about European debt after Moody’s Investors Service downgraded Spain’s credit rating, Ireland’s central bank said that two Irish banks could need extra capital to stay afloat, and after protests in several European nations over austerity measures intended to help the economy in that region.

The Nikkei 225 was down 1.99 percent to 9,369.35 in Tokyo, while the Topix index was 2.06 percent lower and the Mothers market dropped 0.35 percent to 370.56.

The concerns about the situation in Europe sent banks lower, with Sumitomo Mitsui Financial Group (TYO: 8316) down 3.9 percent while Mitsubishi UFJ (TYO: 8306) fell 3.7 percent.

Video games maker Nintendo (TYO: 7974) was down 9.3 percent in Osaka after it cut its profit forecast for the full year by 55 percent,, and after it said its new handheld game player will not be ready for the holiday shopping season.

Other decliners in the region included the Taiex, which was 0.04 percent lower to 8,237.78 in Taiwan, while Hong Kong’s Hang Seng fell 0.09 percent to 22,358.17 and the Straits Times Index was down 0.27 percent to 3,097.63 in Shanghai.

The Sydney Ordinaries dropped 1.22 percent to 4,636.9 in Australia, while the S&P/ASX200 was down 1.34 percent to 4,582.9.

On the other hand, South Korea’s Kospi added 0.34 percent to 1,872.81 while the Sensex was up 0.57 percent to 20,069.12 in India and the Shanghai Composite gained 1.72 percent to 2,655.66.

Property developers were up in China even though the government said it is accelerating the introduction of a new property tax there, told banks to quit lending money for the purchase of third homes, and said that all first-home buyers will have to come up with a 30 percent down payment.

China Vanke Co (SZSE: 000002) added 7.6 percent in Shenzhen, while Poly Real Estate Group (SSE: 600048) was up 8.9 percent in Shanghai.

New York markets were lower on profit taking and despite the upwardly revised numbers on the gross domestic product and on an optimistic report on jobless claims.

The Dow Jones Industrial Average was down 0.3 percent to 10,802.96 at midday, while the S&P 500 fell 0.14 percent to 1,143.18 and the Nasdaq Composite was 0.33 percent lower to 2,368.71.

Crude oil prices were up, with West Texas Intermediate trading above $79 per barrel but metals prices were lower, although gold still traded at $1,307.70 per troy ounce in midday trade in New York.

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