By Neil Dennis
Milan?s stock index slumped during a turbulent week for peripheral eurozone equity markets, as speculation about which will be region?s next debt crisis victim focused on Italy.
Italian government bond yields hit nine-year highs as investors dumped the country?s debt amid fears the crisis would hit its shores ? even perhaps ahead of Spain. Of major concern to investors is Italy?s 120 per cent debt to GDP ratio.
?The signal that is being sent by the bonds of Italy and Spain suggests that market contagion concerns might be shifting to Italy and skipping Spain,? said Divyang Shah at IFR Markets.
The country?s banks had the worst of weeks as their capital strength came under scrutiny in spite of recent recapitalisations in the sector.
?Share prices are down sharply amid speculation that a new round of bank stress tests in the region could reveal new vulnerabilities,? said Robert Lynch at HSBC. He added that Italian banks were the biggest holders of Italian debt.
Among the Italian financials, some shares were briefly suspended from trade on Friday as the country?s market regulator was concerned about excessive losses.
UniCredit, the biggest of Italy?s banks not to have conducted a rights issue, fell 7.9 per cent to ?1.23 on Friday ? taking its weekly loss to 19.8 per cent. Intesa Sanpaolo lost 4.6 to ?1.65 on the day, driving it to a loss of 13.5 per cent over the week.
The FTSE MIB index of Italian shares notched up a weekly decline of 7.2 per cent, falling 3.5 per cent to 19,049.88 on Friday alone.
Financials came under heavy selling pressure in several other peripheral eurozone nations, forcing their domestic stock markets lower.
Portugal suffered after Moody?s downgraded its debt on Wednesday to junk status. Among its top banks, BCP Millennium fell 12.7 per cent over the week to ?0.35. The PSI 20 index fell 2.3 per cent over the week to 7,160.46, recovering slightly after the European Central Bank agreed to accept Portugal?s debt as collateral for loans in spite of its status.
Spain?s Ibex 35 index was down 2.5 per cent on Friday to 9,938.2, a loss of 5.3 per cent over the week, while the Athens General suffered a weekly loss of 4.4 per cent to 1,251.1.
The pan-European FTSE Eurofirst 300 index fell 0.8 per cent to 1,114.44 on Friday for a 0.4 per cent weekly loss.
Other stocks catching the eye over the week included Spanish discount retail Dia, newly spun off from French supermarket group Carrefour and making its debut in Madrid on Tuesday. Issued at ?3.40 a share, it tumbled 6 per cent on its first day, before mounting a strong comeback to finish 5.4 per cent higher over the week at ?3.59.
? The Financial Times Limited 2011