Tuesday 23 May 2017

European bourses edge higher despite Brexit

Traders work on the floor of the New York Stock Exchange (NYSE)
Traders work on the floor of the New York Stock Exchange (NYSE)

European shares initially drifted lower yesterday, while sterling battled back from a one-week low and regained its composure amid the drama of Britain formally triggering its exit process from the European Union.

The pound was the biggest loser on major currency markets as European trading got underway. But it clawed back almost all its losses after a draft EU document made no mention of the possibility that the two sides will fail to strike a deal.

"What is priced in at the moment is a hard Brexit, so if there is something being constructed by the EU that is a little softer, that would send sterling sharply higher," said Mizuho's head of hedge fund FX sales, Neil Jones.

"Sterling will be incredibly sensitive to negotiations and will offer a clear gauge of how things are panning out. We could see it move lower still if negotiations take a sour turn - $1.10 is feasible," said Neil Wilson, senior markets analyst at ETX Capital.

European bourses turned higher by the afternoon, but Ireland's ISEQ Overall Index failed to follow suit at that stage. It was still 0.26pc lower at 6,569.38 by mid-afternoon.

Shares on the move included those in Hostelworld, which advanced 7pc to €2.68 after surging on Tuesday when it announced an extra dividend for shareholders and said it might engage in future buybacks.

Airline software firm Datalex was 1.3pc higher at €3.95, while shares in Swiss-Irish food group Aryzta were 1.7pc ahead, at €29.47.

Applegreen was down 2.1pc at €4.65, while Ryanair was 1.1pc lower as airlines warned that a post-Brexit aviation deal is urgently needed between the UK and the EU.

The UK's FTSE-100 was 0.1pc higher and Germany's DAX was up 0.4pc. France's CAC-40 edged up 0.2pc.

Merger negotiations between London Stock Exchange and Deutsche Boerse were halted after EU antitrust regulators blocked the proposed deal, as expected, saying the merger's size would have harmed competition.

LSE shares gained 2.9pc, while Deutsche Boerse was up 1.8pc.

Norsk Hydro led basic resource stocks higher, up 1.7pc after ratings agency Moody's upgraded its baseline credit assessment of the aluminium producer to Baa2 from Baa3.

German online classified ads firm Scout24 was the worst-performing European stock, down 9pc and set for its worst day in more than three months, after it posted results and a 2017 outlook below consensus. 3I Group gained 4.7pc after Morgan Stanley raised the private equity group to "overweight".

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