Business World

Tuesday 18 December 2018

Europe stocks hit low but stage recovery

European shares hit their lowest in two weeks yesterday, as data showing the German and Japanese economies contracting in the third quarter fuelled worries about global growth amid a plunge in oil prices. Stock image
European shares hit their lowest in two weeks yesterday, as data showing the German and Japanese economies contracting in the third quarter fuelled worries about global growth amid a plunge in oil prices. Stock image

European shares hit their lowest in two weeks yesterday, as data showing the German and Japanese economies contracting in the third quarter fuelled worries about global growth amid a plunge in oil prices.

But they regained ground later, with most indices in the black by mid-afternoon.

However, the pan-European STOXX 600 lost 0.5pc at the open in London as commodities sectors weighed and Italian stocks sold off. It was 0.75pc lower by mid-afternoon.

Italy's decision to stick to its growth and deficit plans in its re-submitted draft budget set the stage for a showdown with the European Union over breaking structural-deficit limits.

It drove government bond yields up and initially sent Italy's FTSE MIB 1.8pc lower, set for its worst fall in a month, as bank stocks fell 1.5pc.

But the main index had recovered some ground later, and was down 0.4pc.

In Ireland, the Iseq Overall Index was 1.3pc higher just over an hour before the close, at 6,218.92.

The biggest gainers included insulation maker Kingspan, which had added 2.6pc at that stage, to €40.38. Agri group Origin Enterprises was up 1.1pc at €5.97.

Ferry group Irish Continental was 4.1pc lower at €4.62, while forecourt retailer Applegreen was down 1.6pc at €6.20.

The UK's Ftse-100 initially fell as Prime Minister Theresa May sought to convince her government to accept a draft European Union divorce deal that opponents say threatens the independence and unity of the United Kingdom.

But it had edged higher later in the day, adding 0.42pc before the close.

Germany's DAX was up 0.2pc and France's CAC-40 was 0.1pc higher.

Overall European earnings have been underwhelming this season, revealing growing margin pressure and concerns about growth and a slowdown in China.

"For 2019, we forecast low-single-digit and below-consensus EPS growth in Europe," wrote Barclays analysts.

They see earnings per share growing at 4pc in the euro zone and 2pc in the UK next year.

That's significantly lower than the aggregate IBES Refinitiv estimates for around 10pc and 8pc respectively.

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