European markets fall on back of bank slumps

European markets fell on Friday as Spanish and Italian banks slumped and jobs data from the US showed a drop in net hourly pay. Investors also fear that the European Central Bank asset-buying plans may not be enough to ignite the moribund euro zone economy.

DUBLIN

In Dublin, Aer Lingus was all the rage as speculation continued about a possible bid for the carrier by the owner of rival British Airways.

Aer Lingus

shares closed in Dublin at €2.50 on the back of a report by financial news blog Betaville that International Consolidated Airlines Group (IAG) has made an indicative offer of between €2.60 and €2.70 for the carrier. IAG later confirmed it made an offer on December 29th at €2.40 per share.

Investors mopped up almost 3.9 million of the airline’s stock stock over the course of a day, which saw it add 6 per cent in the morning before losing most of those gains by lunchtime and then rebounding in later trade.

Rival Ryanair, whose 29.8 per cent holding in Aer Lingus will play a key role in determining the success of any offer, closed 1.12 per cent up at €9.51.

Bookmaker Paddy Power added 1.04 per cent to close at €62.95. In a note on the betting industry, David Jennings, an analyst with Dublin stockbrokers Davy, said that there was very good scope for the business to deliver earnings upgrades this year and suggested that its proposed buy-back programme was likely to support the stock. He gave the stock a neutral rating, the equivalent of a hold.

Index heavyweight CRH, which released an interim management statement this week, shed 1.72 per cent to €19.48 on trades totalling around 500,000 shares. Bank of Ireland tumbled 4.58 per cent to close at 29.2 cent.

LONDON

In the UK, homebuilders

Taylor Wimpey

,

Barratt Developments

and

Persimmon

fell more than 5 per cent as a report showed house-price growth in England and Wales slowed.

Irish-based DIY and builders' merchant Grafton, which has most of its sales in Britain, dipped 2.05 per cent to close at 621 pence. That company also issued an interim management statement earlier in the week.

Among other stocks moving on corporate news, Tesco lost 2.5 per cent. The UK grocer, which surged the most in more than 26 years yesterday after announcing measures from lower prices to store closures, was cut to below investment grade by Moody's Investors Service.

EUROPE

Banks declined the most among 19 industry groups in the Stoxx 600, falling 3.2 per cent to their lowest level since September 2013.

Banco Santander plunged 14 per cent, the most since 1999, after its board approved plans to cut its dividend and sell shares for as much as €7.5 billion. Shares of Spain's largest bank rose 3.3 per cent yesterday before the regulator suspended them.

Spain’s Ibex 35 Index lost 3.9 per cent, the biggest drop among 18 western-European markets. Italy’s FTSE MIB Index slid 3.3 per cent for the second-worst performance, and France’s Cac 40 Index lost 1.9 per cent.

US

US stocks slumped, with each of the major indices down more than 1 per cent in the wake of a two-day rally as investors assessed a monthly payrolls report that gave mixed signals on the economy. Non-farm payrolls rose in December, topping Wall Street expectations, November’s surprising gain was also revised higher. However, wages declined.

AbbVie forecast 2015 earnings largely above analysts' average estimate after the close Thursday, betting on its recently approved hepatitis C drug and growth in its auto-immune disease treatment, Humira.

However, shares dropped 3.2 per cent to $65.49 as health insurer Anthem said it reached a deal under which Gilead Sciences hepatitis C drug Harvoni will be the primary treatment for patients infected with the virus. Additional reporting: Bloomberg, Reuters