Business World

Monday 11 December 2017

Big gains in European markets as Draghi expected to cut rate

John Mulligan

John Mulligan

European stock markets surged yesterday as ECB chief Mario Draghi signalled that the central bank remains ready to act to address continued economic weakness.

Investors expect Mr Draghi to announce a rate cut next month after keeping the rate at 1pc yesterday.

That expectation, coupled with hopes that there will be a more concerted international effort to tackle Europe's lingering debt problems in Spain and Greece spurred stocks, even as German industrial production fell.

"There's always hope that some magic tool would be found," said Ron Florance, managing director of investment strategy for Wells Fargo Private Bank.

"There's no sense of any economic recovery on the near-term horizon for Europe. Things could get worse. Investors tend to be optimists. So they are always hoping for something better."

Ireland's ISEQ, which was suffering earlier in the session, rallied strongly later.

The Overall Index soared 72.93 points, or 2.46pc, to 3,043.72, tipping it back over the psychologically important 3,000 barrier that it had slipped below.

There were some significant movers on the day.

Building materials firm CRH was one of the main gainers. It added 7.2pc, or 94 cent in Dublin, to €13.93.

That rise was fuelled by hopes that the Federal Reserve in the US, CRH's single most important market, will act to encourage more economic growth when its policy makers meet later this month.

The rising tide of European stocks lifted most boats. Packaging giant Smurfit Kappa climbed 3.75pc, or 12.1 cent, to €5.31, while Bank of Ireland surged 7.8pc, or 0.7 cent, to 9.6 cent. The shares are still down nearly a third in the past year, however.

Kenmare Resources jumped 7.8pc to 58 cent. Australia reported strong economic growth in the first quarter fuelled by its mining industry that feeds China's growth. Much of Kenmare's ilmenite production from Mozambique also ends up in China.

Exploration firms Aminex and Petroceltic suffered, even as oil prices rebounded. They were down 11pc and 6.7pc respectively.

National benchmark indices climbed in all 17 western European markets that were open. Germany's DAX rose 2.1pc, while the UK's FTSE 100 gained 2.4pc in its first day of trading this week after a two-day holiday for the royal jubilee. France's CAC 40 also rallied 2.4pc.

Guinness maker Diageo rose 4.3pc to 1,581 pence as the company said it plans to invest in the production of Scotch whiskey, including expanding some existing distilleries.

Lloyds rose 5.2pc to 27.05 pence after agreeing to sell £809m (€1.7bn) Australian corporate real estate loans to a Morgan Stanley and Blackstone Group joint venture for about £388m in cash.

Barclay's gained 8.2pc to 187.8 pence after investment bank Sanford C Bernstein said impairments in the loan books of UK lenders are stabilising.

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