September 20, 2010, 10:28 Business

Irish debt spooks investors

Global indices are losing 0.1–0.6%

Olga Tanas Fear of a debt crisis in the eurozone has returned to stock markets: Ireland's high public debt may increase as the country may need financial assistance. As a result, most world indices lose 0.1–0.6%. Statistics from America also reinforce pessimism.

In the first minutes of trading, the dollar RTS rose by 0.21% and amounted to 1,467.29 points.

The Russian stock market started the week with growth, despite the negative external background. Most Asian stock markets are down, with the Asia-Pacific composite index (excluding Japan, whose markets are closed for a holiday) little changed. The Australian ASX fell by 0.38%, the South Korean Kospi by 0.01%, the Chinese Shanghai Composite by 0.04%, and the Hong Kong Hang Seng rose by just 0.1%. European markets closed in the red. The British FTSE 100 fell by 0.57%, the German DAX by 0.64%, and the French CAC 40 by 0.38%. American markets managed to close slightly higher: the Standard & Poor's 500 added just 0.08%, the Dow Jones Industrial Average – 0.12%, and the Nasdaq Composite – 0.54%.

Investors were disappointed by American statistics. Consumer confidence unexpectedly fell in September: the corresponding index, calculated by economists at the University of Michigan, fell to 66.6 points, which is the minimum value for the year. At the same time, analysts expected the indicator to rise to 70 points.

“A weak labor market and other negative factors are forcing consumers to postpone spending until later. The pace of US economic recovery remains slow,

and until the labor market situation stabilizes, consumer confidence will remain low,” Bloomberg quotes Andrew Gretzinger, senior economist at MFC Global Investment Management. In August, unemployment increased to 9.6% from 9.5% in July.

Europe also added negativity, where fears about the debt crisis have returned.

Irish two-year bond yields jumped 0.5% to 3.54%; thus, the cost of insuring the country's debts has risen to record levels.

The European Central Bank was forced to intervene in the Irish bond market: according to traders, it was small - in the region of tens of millions of euros, writes The Financial Times . Concern was caused by information that appeared in the market that Ireland may seek financial assistance from the International Monetary Fund ( IMF ), as well as a forecast from Barclays, according to which Dublin will be forced to resort to financial assistance if the situation in the financial sector does not improve. The country's government is not experiencing difficulties in raising funds, Finance Minister Brian Lenihan tried to reassure investors . However, shares of Irish banks Allied Irish and Bank of Ireland fell 11% and 5.3% respectively.

The IMF does not expect Dublin to ask for help: “The Irish authorities have taken confident measures against the banking crisis.” The Irish budget deficit is the highest in the European Union : last year it almost doubled - to 14.3% of GDP from 7.3% of GDP, and

bailing out banks and supporting the economy led to an increase in the country's debts by almost 25 billion euros - to 64% of GDP from 43.9% of GDP.

At the end of the week, the RTS fell by 1.5%, the MICEX by 1.1%. One of the catalysts for the fall, in addition to the dynamics of world markets, was falling oil prices: over the past week, the price of American WTI fell by 3.6%, to $73.66 per barrel, while the price of North Sea Brent and Russian REBCO remained at the same level - $78.21 and $76 .65 per barrel, respectively. “The Russian market last week showed multidirectional changes in quotes across the spectrum of the most liquid securities,” says Promsvyazbank analyst Oleg Shagov , adding that the number of shares that have risen in price and those that have fallen in price is approximately the same.

“The fall is corrective in nature,

since most players tried to exit the market before the weekend, as well as wait out the meeting of the US Federal Reserve , at which both optimistic measures to stimulate the economy could be announced, or a different position could be expressed, which would lead to a flight to “defensive instruments” and could provoke a wave of correction on the markets that grew at the end of August,” adds Broco Group analyst Eva Bogova. The Fed meeting, at which a decision on the base rate and bond purchases will be made, will be held on Tuesday, September 21.