Tuesday 20 February 2018

Markets weaken in the face of 'fiscal cliff' stalemate

Donal O'Donovan

Donal O'Donovan

STOCK markets around the world fell yesterday on fears that the US political system could become deadlocked in budget talks aimed at resolving the country's so-called 'fiscal cliff'.

Bond markets were, however, boosted by Italy's success in issuing new 10-year government bonds despite the re-emergence of controversial former prime minister Silvio Berlusconi as a potential candidate in next year's general election.

In Dublin, the ISEQ index of Irish shares closed down 10 points at 3,366.231 in light trading on the second day back after the Christmas break.

In London, the FTSE 100 index of leading shares had its worst one-day fall in more than a month, closing down 0.5pc.

US stocks fell for a fifth straight day, the longest slump since September, as lawmakers there prepared for talks to avoid the fiscal cliff of spending cuts, and tax increases looming in January. Treasuries extended a weekly gain.

Uncertainty over the talks was the main reason shares were off around the world, even though most investors think politicians will reach an agreement to avoid the so-called 'fiscal cliff'.

In Dublin, CRH was the most traded stock yesterday, thanks to its significant exposure to the US market, including federal funded infrastructure projects that use its concrete and asphalt products. Shares in CRH closed down 0.5pc at €5.23 each.

Elsewhere, the picture was mixed. Aer Lingus shares rose 1.67pc to €1.10, while Ryaniar was down 1.17pc at €4.65 per share

Shares in Irish oil explorer Providence Resources closed down almost 3pc at €6.70 each, in keeping with the trend elsewhere.

US energy companies led losses among the 10 main industry groups in the S&P 500, with Valero Energy and Peabody Energy sliding at least 1.7pc each.

In Europe, the Stoxx Europe 600 Index declined 0.7pc, trimming its 2012 advance to 14pc, still the best performance since 2009.

In Spain, shares in Bankia plunged 27pc to the lowest price since its initial share sale in July 2011 as the bank was temporarily excluded from Spain's benchmark IBEX 35.

There was good news elsewhere, with the yield on Italian 10-year bonds dropping to 4.50pc, as the country sold €5.9bn of five- and 10- year government bonds.

Irish Independent

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