Portugal woes sink European stocks

Thu Jul 10, 2014 8:17am EDT
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By Patrick Graham

LONDON (Reuters) - Europe's debt-sodden periphery was back at the top of the list of financial concerns on Thursday, troubles around Portugal's biggest listed bank pushing shares sharply lower and quelling demand for an issue of bonds by Greece.

The noise around BES, whose shares plunged more than 15 percent, drowned out any support for sentiment from Federal Reserve minutes read as showing the U.S. central bank little closer to an outright rise in interest rates.

Stock markets in Germany and France fell around 1.5 percent while Norway's, also hurt by poor results for its own biggest commercial lender, was down more than 2 percent.

Yields on bonds issued by the southern European governments at the heart of four years of turmoil for the euro zone rose across the board and traders said demand for an issue of three-year Greek bonds was lacklustre in response.

"It is not ideal timing given all the concerns the market has on Portugal," said Michael Michaelides, a rates analyst at RBS in London.

"We’ve seen a very strong sale in Ireland. The broader correlation still stands in the periphery … but now you see increasingly that when there is a particular story in one country, that market moves a lot more than the others."

Also playing in to the concerns around the euro zone's southern half were data showing the steepest drop in Italian industrial output in almost two years.

U.S. stock futures pointed to a fall of almost one percent at opening.   Continued...

A man walks past the London Stock Exchange in the City of London October 11, 2013.  REUTERS/Stefan Wermuth