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Europe shares fall after Moody's Ireland downgrade
December 17, 2010 / 6:16 PM / in 7 years

Europe shares fall after Moody's Ireland downgrade

* FTSEurofirst 300 index slips 0.4 percent

* Lloyds down after it reveals provision for Ireland

* Ireland downgrade hits other bank shares

* AstraZeneca down on Brilinta setback

By Brian Gorman

LONDON, Dec 17 (Reuters) - European shares fell on Friday, with banks down after Moody’s slashed Ireland’s credit rating, sparking renewed worries about the euro zone debt crisis, while AstraZeneca fell as a heart medicine failed to win approval.

Lloyds Banking Group (LLOY.L) fell 3.6 percent after the part-nationalised British bank warned it would take a further hit from impairments on its Irish portfolio as a result of Ireland’s economic and fiscal deficit problems. [ID:nLDE6BG1DI]

Other banks to fall included Bank of Ireland BKIR.I and Royal Bank of Scotland (RBS.L), down 13.9 and 5.7 percent, respectively. Banco Santander (SAN.MC), BBVA (BBVA.MC), and UBS UBSN.VX fell between 1.9 and 2.7 percent. The pan-European FTSEurofirst 300 .FTEU3 index fell 0.4 percent to close at 1,126.28 points. Over the week, the index rose 0.1 percent.

Moody’s Investors Service cut Ireland’s credit rating by five notches to Baa1 from Aa2 and warned further downgrades could follow if Dublin was unable to stabilise its debt situation. [ID:nLDE6BG0EG]

“The euro zone crisis will still be a major focus for the next two or three months,” said Mark Bon, fund manager at Canada Life.

“The market is a little disappointed about the European Union’s long-term bailout plan. It doesn’t seem to address the current issues. It set out a system for 2013 - we need something for today.”

AstraZeneca (AZN.L) fell 6.7 percent after its key heart medicine Brilinta failed to win approval from U.S. regulators. [ID:nLDE6BG06F]

Also within the sector, Sonova SOON.VX dropped 2.3 percent, pressured by a ratings downgrade by broker UBS to “neutral” from “buy”.

Across Europe, Britain's FTSE 100 .FTSE, Germany's DAX .GDAXI and France's CAC 40 .FCHI lost between 0.2 and 0.6 percent. The Thomson Reuters Peripheral Eurozone Countries Index .TRXFLDPIPU fell was down 1.7 percent.

The pan-European index .FTEU3 is up 5.5 percent so far this month, on track to post its biggest monthly gain since March, having hit near-27 month highs earlier this week,

“For the year (2011) as a whole, it would be looking good if it wasn’t for this (euro zone debt) problem,” Bon said.

“The global economy is in good shape. Germany is doing well. Asia is still strong, there are plenty of positive things in the background. Companies are doing very well, with strong, profitable growth. Valuations are still modest.”

SUEDZUCKER SHARES SWEETEN

Shares in Suedzucker (SZUG.DE) soared 9.2 percent after Europe’s largest sugar producer hiked its fiscal 2011 outlook. [ID:nLDE6BG0NI]

Technology stocks were among the other gainers. SAP was (SAPG.DE) up 1.6 percent as traders pointed to forecast-beating results of peer Oracle ORCL.O, which gained 5 percent [ID:nN17101868].

Traders also cited comments from Qatar’s finance minister that the emirate did not rule out investing in the German software giant. [ID:nLDE6BF27G]

Germany’s Ifo think-tank showed German business morale rose to its strongest level since 1991 in December, buoyed by an increasingly strong domestic sector. [ID:nLDE6BG0KP]

“There is some profit-taking (today) after strong gains this week, but the trend is still positive. The uptrend will continue into 2011, with the DAX rising to 7,500 points by mid next year,” said Heinz-Gerd Sonnenschein, equity strategist at Deutsche Postbank in Bonn. (Additional reporting by Harpreet Bhal; Editing by Jane Merriman)

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