Sun, Nov 28, 2010 - Page 10 News List

European stocks decline on Portuguese debt concerns


European stocks had their biggest weekly decline in eight weeks as concern mounted that peripheral eurozone countries can’t repay their debt.

Banks and insurers led the decline as investors waited to find out how much Ireland will borrow from the European bailout fund and as the cost of insuring Portuguese government debt rose to a record. Bank of Ireland PLC tumbled 45 percent, the largest weekly drop in the benchmark STOXX Europe 600 Index.

The STOXX 600 fell 1.1 percent this past week, the biggest weekly drop since September. The gauge has still rallied 15 percent since its low this year in May as investors speculated that the world economy will grow after companies reported better-than-estimated results and central banks from the US to Japan announced more stimulus measures to prop up the economic recovery.

“After Ireland, Portugal is a likely candidate for aid with Spain close behind,” John Plassard, head of European equities at Louis Capital Markets LP, said.

The cost of insuring Portuguese and Spanish government debt against default rose to record levels, according to data provider CMA. Portuguese Minister of Finance Fernando Teixeira dos Santos said EU governments couldn’t impose a bailout on his country even as speculation mounts that Lisbon will eventually have to ask for one.

The majority of eurozone governments and the European Central Bank are putting pressure on Portugal to accept a bailout to stop contagion spreading to Spain, the Financial Times Deutschland reported on Friday.

Meanwhile, Irish officials raced to complete a deal for an international aid package before financial markets reopen next week with talks focusing on the status of bondholders in Ireland’s largest banks amid concern that the government will force holders of such debt to share the cost of bailing out its financial system.

The Bank of Ireland’s 45 percent loss came amid concern that Dublin will force some of the cost of bailing out the country’s banks on senior bondholders.

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