Shares hold steady as US plan outweighs concerns on economy
Published 04/11/2010 | 05:00
IRISH shares remained solid yesterday as the expectation that the US Federal Reserve would pump more cash into the economy there, combined with another strong performance from oil and gas companies, outweighed the worsening perception of the Irish economy.
Providence Resources maintained the momentum it picked up on Tuesday after the oil and gas explorer apparently found an oil field off the Dublin coast. By the closing bell the stock was up 12.5pc closing at €3.60. The stock has surged more than 75pc since Monday's opening.
Providence was not the only oil company to come out on top yesterday, with Petroceltic adding a further 10.71c to the 7pc it added on Tuesday.
CRH was buoyed by the expectation that the US Federal Reserve may pump up to $1 trillion into the ailing American economy (QE2). The construction giant, which conducts much of its business on the American continent, closed up 3.16pc at €13.05.
Those gains were enough to push the ISEQ into positive territory and outweigh the ongoing difficulties in the banks. Irish Life & Permanent and Allied Irish Banks both suffered heavy falls amid ongoing doubts about Irish sovereign debt.
The yield, or interest rate, on Irish 10-year bonds touched 7.5pc while the spread on German bunds reached a new record of more than 500bps and AIB signalled there was a 63pc chance of the bank defaulting on its subordinated debt within five years.
IL&P fell 3.6pc to €1.41 and AIB tumbled 3.58pc to 32c. Both banks account for barely 1pc of the index these days, so the change in their price did not move the market the way they would have done even three months ago.
Ireland's was one of only three markets that did not decline in Western Europe as the markets waited for news on QE2 and continued to be worried by the debt crisis here.
The UK's FTSE 100 slipped 0.2pc while France's CAC 40 and Germany's DAX dropped 0.6pc.
The composite Stoxx Europe 600 Index slipped 0.4pc.
"The market's expectations on the outcome of the Fed meeting are very high and we're in a tense situation at the moment," said Jens Finkbeiner, at F+M Financial in Frankfurt.
"We should see a clear trend after the meeting but the question is in which direction?
"I do not exclude the possibility of a correction as the market has been rising sharply."
In London, Next fell 2.2pc after the retailer said a sales decline worsened in the third-quarter while, in Frankfurt BMW slid 1.4pc even after the luxury-car maker raised its full-year automotive operating profit.
"The guidance is low," said Adam Hull, a London-based analyst with WestLB. "They should be able to do better."