European shares fall as the rescue of Ireland fails to calm investors

European stocks fell, extending three weeks of losses, a bailout of Ireland to reassure investors that the crisis in the region include sovereign debt.

Spanish and Italian equities led declines in Europe and the cost of insuring the debt of nations rose to records. Vestas Wind Systems A / S lost 4.5 percent as Exane BNP Paribas recommended selling shares of the world's largest maker of wind turbines. Allied Irish Banks Plc and Bank of Ireland Plc rose more than 7 percent after the governments of the Euro-agreed to give the nation an aid package of 85 billion euros (113 million dollars).

The Stoxx Europe 600 index fell 0.9 percent to 264.22 at 2:16 pm in London, after rising 0.8 percent. The measure has declined for three consecutive weeks as concern mounted that the peripheral countries of the euro area may not be able to pay its debt and North Korea fired missiles in South Korea for the first time since the 1950-53 war.

"If you think the problems stopped sovereign in Greece, Ireland and Portugal may depend on whether you think this is a problem with the entire Western financial system, or if you think it's just one problem with each of these institutions debt, "Jim Reid, head of global strategy at Deutsche Bank AG, wrote in an email today. "Spain can not be an isolated problem in itself, but if we are in a deleveraging trend may simply be a victim of deleveraging to come."

Indebted economies

The gains in the Stoxx 600 were limited to 4.1 percent this year, limited by losses in heavily indebted economies in the euro region, the cost of providing a rescue plan for Greece and the expectations of more charges to support Ireland.

national benchmark indexes fell in all 18 western European markets today, with the exception of Ireland. IBEX 35, Spain fell 1.7 percent, the FTSE MIB Italy lost 1.5 percent and Portugal PSI-20 fell 1.2 percent.

The cost of insuring the debt of Spain and Portugal rose to unprecedented levels, according to CMA prices for credit default swaps. Contracts in Spain rose 14 basis points to 336, while Portugal rose 23 basis points to 524.

"There is still great uncertainty in Europe with investors refusing to buy shares in Spanish or Portuguese for fear that they might be the next two states that require a solution similar to Ireland's rescue," said Joshua Raymond, market strategist at City Index Ltd. in London.

Franco-German compromise

European finance chiefs in crisis talks in Ireland yesterday also approved a Franco-German agreement on the post-2013 that rescues not automatically mean investors will split the cost of future taxpayer bailouts. The loss-sharing proposal by German Chancellor, Angela Merkel, has caused consternation among bond traders.

In the UK, house prices fell for the fifth consecutive month in November as demand for goods was reduced more in nearly two years, Hometrack Ltd. said. The report adds to evidence of a weakening housing market after Rightmove Plc said Nov. 15 that home sellers reduce asking prices by the most since 2007 this month and banks in the United Kingdom approved the minor number of mortgages since 2009 in October.

Even so, stocks in Europe will join up 9.9 percent at the end of 2011 and the actions of the UK will rise by 13 percent as increased revenue and investors for actions on bonds, Graham Secker, Morgan Stanley chief of pan-European equity strategy, wrote in a report.

Vestas slid 4.5 percent to 157.5 kronor as Exane downgraded the shares to "underperform" from "neutral."

Irish banks

Bank of Ireland jumped 19 percent to 31.4 cents, the biggest gain in the Stoxx 600. Allied Irish rose 7.9 percent to 36.9 cents.

Irish banks have up to 35 million euros in aid, while senior bondholders will escape the costs of rescue led by the European Union and the International Monetary Fund, the government said.

Gartmore Group Ltd., the fund manager in the UK which collapsed earlier this month after losing money star manager Roger Guy, rose 2 percent to 105.1 pence as the Financial Times reported that Henderson Group Plc is considering buying the company.

Henderson has asked the consultants to examine the possibility of buying part or all of its rival, the Financial Times reported on its website, citing unidentified sources familiar with the situation. Henderson, on behalf of clients, controls about 11 percent of Gartmore, the newspaper said.

Aryzta AG rose 5.1 percent, to 42.35 Swiss francs after the Swiss supplier of bakery products to restaurants, said fiscal first-quarter sales gained 33 percent.