Sunday 26 March 2017

Yellen's interest rate caution helps lift global shares

US Federal Reserve Chair Janet Yellen
US Federal Reserve Chair Janet Yellen

European shares rose yesterday after Federal Reserve Chair Janet Yellen's overnight call for caution in raising US interest rates boosting equities, while German retailer Metro surged on demerger plans.

The pan-European FTSEurofirst 300 index was up 1.4pc in early trading. Germany's DAX gained 1.7pc while the Eurozone's blue-chip Euro STOXX 50 index rose 1.6pc.

The FTSEurofirst is still down 7pc since the start of 2016, however, due to concerns about a China-led global economic slowdown.

In Dublin the ISEQ index of Irish shares headed into the close up half a percent at 6,327.40.

In a mixed day in Dublin bellweather stock Bank of Ireland underperformed, down 1.91pc to trade at 25.7 cents a share at 4pm.

PTSB, which is relatively less exposed to the UK market, saw its shares up 5.49pc at the same time, at €2.90 each.

Globally, Janet Yellen's comments were the big driver on markets.

Hampstead Capital hedge fund manager Lex Van Dam said Yellen's comments highlighted how measures from the Fed and European Central Bank (ECB) to try to keep rates low were hitting returns on bonds and cash, and pushing investors towards the better returns on offer from stocks.

"Equity markets remain supported by the global central banks - the economy might not be in great shape but with real rates in negative territory, there are not many other places to find a return," said Van Dam.

Yellen's comments weakened the US dollar on currency markets, which in turn supported the shares of mining and energy companies since a weaker dollar makes commodities more affordable for investors holding other currencies.

Steelmakers rose after Tata Steel said it wanted to exit the British market - bad news for UK jobs but sparking hopes of European consolidation. Shares in ThyssenKrupp were up 6.4pc, ArcelorMittal added 3.3pc and Outokumpu 6.4pc.

Germany's Metro also jumped 11pc after the company proposed to split itself in two, with its wholesale and food business transferred to a separate entity and the consumer electronics business remaining part of the existing company.

French transport group Alstom also rose 3.7pc as investors welcomed new financial targets.

In London shares in Premier Foods settled at just under 60 pence a share, well below US bidder McCormack's revised 65 pence offer. The new offer, announced yesterday, is a 106pc premium to the share price a week ago, before McCormack showed its hand.

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