Wednesday 17 January 2018

Bank stocks down again on fallout from Obama plan

Bank stocks took a knock all over Europe and the US, but companies outside the financials performed strongly, with some making considerable gains, particularly the pharma sector once again.

Even though they don't do any proprietary trading, AIB and Bank of Ireland endured a torrid day, but recovered most of the ground later.

At one point Bank of Ireland was down 9pc, with AIB sliding by 8.3pc as US President Barack Obama sought to restructure the entire US banking system.

The fortunes of both banks are more tied into NAMA than anything else, but analysts expect bank valuations to reduce on the back of Mr Obama's plans and this spells a problem for AIB's and Bank of Ireland's valuations.

The ISEQ did not drop much, ending down 0.26 at 3,036.

Elsewhere corporate news was in short supply and traders described the day as relatively quiet outside the financials.

The slide in the McInerney share price continued, dropping 11.79pc, with no sign of a pick-up in house prices.


The Government's economic adviser Alan Ahearne meanwhile said NAMA could sell properties later this year to generate cash for itself.

While this is understandable for NAMA, if the properties sold are in Ireland it could depress the market further, which would be a problem for housebuilders like McInerney.

CRH, the largest component of the ISEQ, was down 0.54pc.

Looking at the entire week it was gloom in most markets, with European stocks tumbling by the most in almost three months after Mr Obama's announcement.

The Dow Jones Stoxx 600 Index erased all of its gains for the year this week, dropping 2.6pc to 249.91, the sharpest weekly retreat since October.

Even so, the benchmark is still up 58pc since March, according to Bloomberg data.

"Equity markets have climbed far higher than many expected and a bout of profit-taking is due," said London-based Mike Lenhoff, who helps oversee about $35.5bn (e25bn) as chief strategist at Brewin Dolphin Securities.

"Mr Obama's proposals have really jolted the equity markets. Their implementation may not see the light of day but they might continue to affect sentiment towards banks," he said.

Stocks also fluctuated as more than 60 companies in the Standard & Poor's 500 Index reported fourth-quarter results this week in the US.

Some of the biggest banks, including Citigroup, Bank of America, Morgan Stanley and Goldman Sachs, posted results.

Irish Independent

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