Saturday 24 August 2019

European stocks rebound despite Mid East concerns

Russian President Vladimir Putin
Russian President Vladimir Putin Newsdesk Newsdesk

European shares had rebounded by mid-afternoon yesterday from their largest drop in almost two weeks as investors shrugged off geopolitical tensions in the Middle East to focus on renewed optimism about US growth.

By mid-afternoon in Dublin, the ISEQ Overall Index increased 1.39pc, or 92.67 points, to 6,738.79.

The leaders on the Dublin market included Kerry Group, which increased 2.1pc to €74.12, while building materials group CRH rose 2.4pc to €27.49.

On the other side of the board, the mid-afternoon laggards included insurance group FBD, which fell 0.5pc to €6.77, while packaging giant Smurfit Kappa had lost 0.5pc to €24.58.

A gauge of travel-and-leisure shares posted the biggest gain on the Stoxx Europe 600 Index, with Thomas Cook Group jumping 8.5pc after full-year earnings beat estimates and it said demand is holding up despite recent terror attacks.

Deutsche Lufthansa added 1.7pc and TUI climbed 2pc. Better-than-expected dividend announcements pushed LafargeHolcim and Metro up at least 4.8pc, while Swiss Life Holding added 3.1pc.

The Stoxx 600 rose 1.5pc to 381.07 by mid afternoon in London.

Equities slid yesterday after Turkey shot down a Russian warplane, with President Vladimir Putin pledging "serious consequences" for the attack.

The downing occurred just as investors began questioning a recent stock rebound amid a slump in commodities and likely US interest-rate increase.

US President Barack Obama and the NATO military alliance have called on Russia and Turkey to deescalate tensions, warning they could damage efforts to fight Islamic State.

"Until tensions really blow up then markets can cope with geopolitics," said Rosamunde Price, who helps oversee about $14 billion as chief investment strategist at Seven Investment Management in London.

"The assumption is that the big players won't go to war over this, so they'll have to sort it out," Price said.

"The focus is turning once again to evidence that the US economy is doing well, which takes the edge off any market jitters."

US data yesterday on durable goods orders, new home sales and the American services industries are projected to show improvements in growth.

With traders pricing in a 74pc probability that the Federal Reserve will increase rates next month, recent reports have boosted confidence that the world's largest economy is strong enough to cope with higher borrowing costs.

European equities had rallied 13pc from their low in September to a three-month high at the end of last week amid optimism that the European Central Bank will add to its stimulus programme and that higher US interest rates won't hamper growth. (Bloomberg)

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