Friday 24 November 2017

Markets snap back as Yellen boosts confidence

US Federal Reserve chairperson Janet Yellen. Photo: Reuters
US Federal Reserve chairperson Janet Yellen. Photo: Reuters

European stock markets snapped back in early trading yesterday after heavy losses early in the week.

The Iseq index of Irish shares was up more than 3pc in late afternoon trading at 5,907.39.

Investors and traders initially reacted positively to Congressional testimony from Federal Reserve Chair Janet Yellen, who signalled her intention to continue raising interest rates, though warning of growth risks.

US stocks joined a rally in European equities as the Federal Reserve signalled it won't rush to raise interest rates amid turmoil in financial markets that has clouded the outlook for global growth. Strength in the yen spurred intervention warnings.

The Standard & Poor's 500 Index halted a three-day slide as Janet Yellen indicated the Fed has a wary eye on volatility that could delay policy tightening. Equities pared gains of more than 1.5pc, however, as she said market fears of a recession are showing up in asset prices. Oil fell below $28 a barrel after a rout of almost 6pc on Tuesday.

Deutsche Bank remains a big focus for investors, with the 'Financial Times' reporting it is considering buying back several billion euro of its debt, in what would be a show of financial might.

Germany's flagship lender, whose shares have fallen almost 40pc this year, rose more than 13pc yesterday. The STOXX Europe 600 banks index was up 5pc.

"The rebound in Deutsche Bank is helping to reassure some investors who had been concerned about possible contagion in the banking sector," said Francois Savary, chief investment officer at Geneva-based Prime Partners.

That helped lift the wider bank sector. Bank of Ireland shares rose more than 6pc to 26.3 cents each, Italy's Intesa Sanpaolo and UniCredit were both up more than 11pc and Germany's Commerzbank added 9pc.

The FTSEurofirst index had fallen for seven trading days and on Tuesday hit its lowest since September 2013, before yesterday's recovery.

Markets remain fragile. Yesterday's weak industrial output data for Britain, France and Italy followed news a day earlier of a shock plunge in Germany, setting back expectations that economic growth across the continent might be picking up in 2016.

Yesterday though markets by and large shrugged off that news. The recovery in Irish shares was broad based. Names ranging from Kenmare to Aminex to Providence Resources saw double-digit percentage gains. Smurfit Kappa shares were up 10pc as the market welcomed results there.

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