Business World

Tuesday 21 November 2017

End of Fed stimulus sparks slump

Colm Kelpie

Colm Kelpie

IRISH shares fell in line with other European bourses as the markets digested the announcement from the US Federal Reserve that it would end monetary stimulus next year.

By the close in Dublin, the ISEQ Overall Index had slipped 1.34pc or 52.96 points to 3890.46.

The Dublin market fell throughout most of the trading day.

The laggards included the State's two main banks – Bank of Ireland and AIB amid comments from German Finance Minister Wolfgang Schaeuble that there was little leeway for Europe's bailout pot, the European Stability Mechanism (ESM) to be used for legacy debt. Bank of Ireland fell 2.6pc to €0.15, while AIB dropped 5.8pc to €0.07.

Drinks group C&C also had a poor day, falling 5.3pc to €4.08, while packaging giant Smurfit Kappa led the laggards with a 6.4pc drop to €11.94.

On the other side of the board, drug company Elan increased 4.2pc to €10.53; while Ryanair jumped 1.2pc to €7.06, after trading as high as €7.30 – as the airline said it would return a €1bn to shareholders over the next two years.

Donegal Creameries was up 0.44pc to €4.55, while shipping group Irish Continental increased 0.2pc to €23.15.

Elsewhere, European stocks sank the most in more than 18 months on the back of the announcement from the Fed.

Western Europe

The Stoxx Europe 600 Index plunged 3pc, while national benchmark indexes fell in every western European market, except Iceland.

Germany's DAX slid 3.3pc and France's CAC 40 lost 3.7pc. The UK's FTSE 100 retreated 3pc, the biggest drop since September 2011.

"The projection for the unemployment rate was adjusted downward, which gives an indication that the end of quantitative easing might be happening sooner rather than later relative to what people expected," said Raimund Saxinger, a fund manager at Frankfurt-Trust Investment GmbH.

Rio Tinto Group and Renault led mining and automobile companies lower as a gauge of Chinese manufacturing fell.

Swatch Group slid the most in almost 21 months after Swiss watch exports declined.

Eurotunnel Group tumbled 12pc after Les Echos reported the European Commission will demand a reduction in tolls to use the Channel Tunnel.

Across the Atlantic, the Standard & Poor's 500 Index sank 1.6pc early afternoon in New York to extend its biggest two- day drop of the year.

"It's a knee-jerk downward reaction because everyone is afraid that if you're taking the punch bowl away that must be bad for markets," Philip Orlando, the New York-based chief equity strategist at Federated Investors said.

Irish Independent

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