Friday 15 December 2017

Draghi comments hit European utiliies

ECB chief Mario Draghi
ECB chief Mario Draghi


Hawkish comments from European Central Bank President Mario Draghi hit interest rate-sensitive utilities shares on Tuesday, dragging down European indexes, while a warning from auto parts supplier Schaeffler hit the whole sector.

Mr Draghi on Tuesday opened the door to tweaks in the bank's aggressive stimulus policy, fuelling market expectations the bank will announce a reduction of stimulus as soon as September.

Utilities, whose constant dividends flows become less attractive when monetary policy tightens, fell 2.4pc, suffering their biggest one day loss since November.

Shares in Spanish power network operator Red Electrica , Italian gas firm Italgas and German heavyweight utility E.ON were among the top losers in Europe with losses of more than 3pc.

Their losses helped drag the pan-European STOXX 600 index down 0.8pc.

However shares in banks, which have long suffered from the ECB's ultra-loose policy, were boosted by Mr Draghi's remarks with the euro zone sectoral index ending up 1.4pc.

Shares in banks such as Caixa, Deutsche Bank , Sabadell and Bankia - which are more sensitive than others to the rate cycle - were among the top five eurozone bank gainers, all up over 2.4pc.

Bankia got an extra boost as investors cheered to its deal to buy smaller peer BMN.

Car makers fell 1.5pc after German auto-parts supplier Schaeffler slashed its profit guidance on growing price pressures and high costs. Schaeffler shares tumbled 12.8pc.

AP Moller-Maersk, the world's biggest advertising agency, and WPP fell 0.5pc and 0.8pc respectively after falling victim to a global cyber attack.

Irish Independent

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