Wednesday 28 June 2017

Europe battens down the hatches

John Mulligan

John Mulligan

As European markets opened yesterday morning it was a case of battening down hatches for another bout of turmoil.

While many markets initially edged higher, they quickly plunged into negative territory as investors continued to worry that the US was braced to enter recession again and the EU debt problem could spiral.

Nerves were also frayed as China said inflation touched a three-year high of 6.5pc last month. That spurred concerns that the world's second-biggest economy might seek to raise interest rates. Some analysts believe that the country will do so once more this year.

Oil prices also continued to fall yesterday morning and investors made for the safer harbours of gold -- which hit another record high -- and currencies such as the Japanese yen.

But underscoring the intense volatility that's been witnessed over the past week, markets rallied by the afternoon, taking the lead from the US as investors there bet that the Federal Reserve would act to help stabilise markets. The ECB continued to buy Spanish and Italian bonds in an effort to shore up confidence.

In Ireland, the ISEQ Overall Index sank as much as 2.5pc earlier in the day before staging a comeback in line with other European indices. It finished the session 2.95pc, or 70.62 points higher, at 2,466.35. That's still at a level it traded in April 2009.

Gainers

The biggest gainers included mining firm Kenmare Resources, which relies heavily on demand from China. It added 12.6pc, or 5.5 cent, to finish at 49 cent.

Pharmaceutical group Elan, which has been the subject of heavy sell-offs in recent sessions, rose 10.3pc, or 64 cent, to €6.83.

Paper and containerboard manufacturer Smurfit Kappa, which releases interim results today, gained 7.8pc, or 37.5 cent, to finish at €5.17. The stock has tanked during the past week due to its debt pile and exposure to European consumer demand.

Builders provider Grafton Group -- which had been trading up over 10pc -- closed up 8.24pc, or 21 cent, at €2.76.

ISEQ heavyweight CRH added 4.57pc, or 54 cent, to finish at €12.46.

Following yesterday's rally, national benchmark indices closed up in 13 of the 18 western European markets. The UK's FTSE 100 climbed 1.9pc and France's CAC 40 increased 1.6pc. Germany's DAX Index remained in the red, however, and slipped 0.1pc.

The Stoxx 600 advanced 1.4pc to 232.2 at the close in London, having earlier tumbled 5.1pc. The gauge has still plunged 20pc from this year's high in February.

"Sentiment is already pretty battered," George Godber, who manages £150m (e172m) at fund firm Matterley.

"The fears of the US going into recession have now passed and we've priced in a double dip."

Irish Independent

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