European Shares Slip Ahead of Irish Bank Tests

Reuters

European shares slipped on Thursday as investors traded cautiously ahead of the Irish bank stress tests results, with banking stocks reversing earlier gains, while H&M (HMb.ST) fell after earnings missed forecasts.

By 0928 GMT, the pan-European FTSEurofirst 300 .FTEU3 index of top shares was down 0.1 percent at 1,133.32 points, but the index is still on track to end the quarter higher.Investors will be closely watching the Irish bank stress tests results, with media reports indicating the Irish government is set to announce a radical restructuring of the industry.

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Bank of Ireland (BKIR.I) and Allied Irish Banks (ALBK.I) shares were suspended from trading, pending the results of the stress tests, due to be published at 1530 GMT, as well as any subsequent announcements by the individual banks.

On Wednesday, bancassurer Irish Life & Permanent (IPM.I) was suspended following media reports the bank stress tests might force it into state control. [ID:nLDE72T086]

"Irish banks have been suspended from trading and if the results show that Irish Life & Permanent (IPM.I) needs state control it will have a knock on effect on sentiment for the banking sector," Will Hedden, sales trader at IG Index said.

"Banking stocks will be impacted."

The banking sector, featured among the worst performers, with the STOXX Europe 600

Banks .SX7P down 0.7 percent. KBC Groep (KBC.BR), which has exposure to Irish loans fell 3.7 percent, while Credit Agricole (CAGR.PA) slipped 1.5 percent.

"I think you go straight to the stocks that have the poorest quality balance sheets, and that's Credit Agricole and KBC," said a trader at a leading U.S. investment bank.

"It's specifically tied into Core Tier 1 ratios, so people just revisit that."