Saturday 27 May 2017

Lenders hit hardest as optimism over US wiped out

Peter Flanagan

Peter Flanagan

IRISH stocks handed back most of their gains over the past week as the optimism that had surrounded the US Federal Reserve's quantitative easing measures was finally overcome by the problems in the Irish economy.

For the day, the ISEQ Overall Index fell 1.99pc, or 54.90 points, to 2,701.51 after big losses on financial stocks spilled into the wider market. Despite the big loss, the index ended the week ahead of where it started, having opened on Monday at 2,684.25.

The banks were the big losers yesterday, as the increasing yield on government debt took a huge toll. The yield on 10- year government bonds was 7.8pc on Thursday night, while the spread against benchmark German bonds stood at more than 5.1pc. Those numbers took a huge toll on the banks, whose debt is part of the wider sovereign debt under the bank guarantee scheme.

All three touched 52-week lows yesterday. AIB tumbled 10.67pc to 27c, while Bank of Ireland slumped 12.91pc to 43c. IL&P dropped 19.79pc to €1.05.

There were losers across the board, with Aer Lingus slipping 5.13pc to €1.11 after reporting a 35pc rise in third-quarter profits, while Providence Resources lost 14.29pc to close at €3.

Stocks gaining ground were few and far between but some food stocks proved resilient. Aryzta posted a small gain of 0.65pc to €30.90, while Kerry Group closed marginally up at €26.75.

FBD Insurance was another winner, gaining 3.33pc to €6.20.

Ireland proved to be one of the exceptions in Europe, with 12 out of 18 western European markets finishing in positive territory. The UK's FTSE 100 Index rose 0.2pc, while France's CAC 40 Index was unchanged. Germany's DAX gained 0.3pc and the composite Stoxx 600 added 0.4pc.

"Growth momentum is showing signs of picking up again and corporate results remain strong," said Robert Parkes, a strategist at HSBC.

"Recent developments on the macro-economic front suggest the soft patch may be coming to an end. And for those that have been fearing a double-dip or a period of stagnation, these should be welcome developments that may calm nerves."

In London, Carphone Warehouse soared 11pc after raising its profit forecast for the year, but Royal Bank of Scotland dropped 4.5pc after reporting a third-quarter net loss of £1.8bn (€2.07bn).

Irish Independent

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