Banks drag Iseq downwards

The Iseq index shed 1.3 per cent this morning, falling to 2,720.66, on the back of a disastrous performance from the banks.

AIB, Bank of Ireland and Irish Life and Permanent all lost significant ground this morning as 10-year bond yields remained at record levels and the markets reacted to the Government's austere budget plans.

Irish Life and Permanent was the biggest loser, shedding 11 per cent and falling to €1.16, while AIB and Bank of Ireland both dropped 8 per cent to €0.27 and €0.45 respectively.

"We have Ireland with a real estate problem, which is much bigger than expected, and people extrapolate that to the rest of the euro zone," said a Madrid-based trader.

Index heavyweight CRH shed 1.6 per cent, or 23 cent, falling back to €13.42.

Smurfit Kappa shed 2.3 per cent to €7.90 despite stockbrokers expecting it to announce big increase in EBITDA when it reports its third quarter figures next week.

Aer Lingus, which reported a €79.2 million profit for the three months ending September, has lost 1 per cent during the session. Its chief executive Christophe Mueller warned the aviation sector could face a challenging 2011.

Exploration firm Providence Resources shed 15 per cent this morning, falling 53 cent to €2.97, undoing some of the gains it experienced earlier in the week following announcements about two projects off the east Irish coast.

Elsewhere, European shares rose close to a two-year high on today, with miners among the biggest gainers, after a key report showed the US labour market was stronger than expected.

Britain's FTSE 100, France's CAC40 AND Germany's DAX rose between 0.2 and 0.4 per cent.