Futures have turned decidedly bearish before the open. This from Marketwatch:
LONDON (MarketWatch) — An initial rally in European shares quickly petered out Monday as a multi-lateral 85 billion euro ($113 billion) bailout package for Ireland only briefly lifted sentiment.
Several developments helped sour the mood, including a lackluster Italian bond auction and concerns that the debt crisis will not end with Ireland but spread to Spain, Portugal and other peripheral euro-zone countries. Madrid and Lisbon led European stocks lower, while the Irish and Greek markets were the only ones managing to eke out gains.
The Stoxx Europe 600 index /quotes/comstock/22c!sxxp (ST:STOXX600 264.58, -2.02, -0.76%) opened higher but slipped into the red two hours into the session. In recent trading, it was down 0.6% to 265.03. The index lost 1.1% last week.
Of the main indexes in the region, France’s CAC-40 index /quotes/comstock/30t!i:px1 (FR:PX1 3,683, -45.93, -1.23%) fell 0.8% to 3,759.04, the U.K.’s FTSE 100 index /quotes/comstock/23i!i:ukx (UK:UKX 5,613, -55.21, -0.97%) slipped 0.4% to 5,649.26, and Germany’s DAX 30 index /quotes/comstock/30p!dax (DX:DAX 6,767, -82.42, -1.20%) declined 0.7% at 6,803.90.
Initially, all these indexes rallied after European Union finance ministers Sunday endorsed a bailout package for Ireland. The package includes €10 billion for immediate recapitalization measures, €25 billion on a contingency basis for the banking system and €50 billion to cover budget-financing needs.
But as Monday’s session progressed, attention shifted to the fact that some issues were still not sorted out by the measures announced.
“The news yesterday, on the whole, was more positive than negative. The obvious measure aimed at stabilizing the market was the fast-forwarding of the debt-restructuring mechanism,” said Elisabeth Afseth, fixed-income analyst at Evolution Securities.
The details of the mechanism were previously set to be discussed in mid December.
Afseth noted, however, that whether a country is deemed solvent or not will need to be a unanimous decision, and thus open to political pressures. She also said that existing bond holders “could face losses if a country is deemed insolvent in the post mid-2013 world.”
In the current context, “you’d be struggling to find anyone to put a lot of money into a fund that invests in peripheral markets. At the moment a low return from safe assets seems pretty desirable,” she said.
Auto stocks were at the forefront of the decline Monday, with shares of Daimler AG /quotes/comstock/11e!fdai (DE:DAI 50.40, -0.93, -1.81%) down 2.1% in Germany and Peugeot SA /quotes/comstock/24s!e:ug (FR:UG 29.66, -0.80, -2.61%) down 1.7% in Paris.
The telecoms sector also came under pressure, with Vodafone Group /quotes/comstock/23s!a:vod (UK:VOD 162.00, -3.30, -1.10%) /quotes/comstock/15*!vod/quotes/nls/vod (VOD 25.31, -0.62, -2.39%) and Telefonica SA /quotes/comstock/06x!e:tef (ES:TEF 16.75, -0.22, -1.27%) /quotes/comstock/13*!tef/quotes/nls/tef (TEF 65.85, -1.31, -1.95%) both down around 1%.
Financial weaken again
While many financial stocks initially got a lift from the Irish rescue package, particularly in the U.K. and in peripheral markets, only a handful remained higher in late morning.In France, BNP Paribas SA /quotes/comstock/24s!e:bnp (FR:BNP 47.53, -1.22, -2.50%) fell 2.5% and Credit Agricole SA /quotes/comstock/24s!e:aca (FR:ACA 9.83, -0.24, -2.35%) lost 1.1%. In Germany, Commerzbank AG /quotes/comstock/11e!fcbk (DE:CBK 5.74, -0.07, -1.17%) declined 1%.
It was a more cheerful day in Ireland, where the ISEQ index /quotes/comstock/30q!ieop (XX:IEOP 2,685, +18.27, +0.69%) rose 0.7% to 2,685.32, boosted by a 21% gain for Bank of Ireland /quotes/comstock/13*!ire/quotes/nls/ire (IRE 1.72, +0.28, +19.44%) /quotes/comstock/30b!bir (IE:BIR 0.32, +0.06, +21.21%) and a 8% jump for Allied Irish Banks PLC /quotes/comstock/13*!aib/quotes/nls/aib (AIB 1.03, +0.08, +8.78%) /quotes/comstock/30b!aib (IE:AIB 0.37, +0.03, +9.36%) .
In a regulatory statement, Bank of Ireland said it would seek to raise €2.2 billion in capital by Feb. 28, via “internal capital management initiatives, support from existing shareholders and other capital market sources.”
Shares of Irish Life & Permanent Group Holdings surged 53% in Dublin trading.
In the U.K. shares of financial institutions with a large exposure to Irish sovereign debt also got a lift. Royal Bank of Scotland Group /quotes/comstock/23s!a:rbs (UK:RBS 38.70, +0.01, +0.03%) /quotes/comstock/13*!rbs/quotes/nls/rbs (RBS 12.03, -0.04, -0.33%) , in particular, was buoyed by the rescue deal, gaining around 1%.
In Spain, the IBEX 35 index /quotes/comstock/20r!i:ib (XX:IBEX 9,397, -150.20, -1.57%) lost 1% to 9,448.60, as Banco Bilbao Vizcaya Argentaria SA /quotes/comstock/13*!bbva/quotes/nls/bbva (BBVA 9.62, -0.70, -6.78%) /quotes/comstock/06x!e:bbva (ES:BBVA 7.39, -0.16, -2.16%) fell 1.6%.
Portugal’s PSI 20 index /quotes/comstock/30t!i:psi20 (XX:PSI20 7,489, -92.65, -1.22%) slumped 1%.
