Tuesday 12 December 2017

ISEQ falls over concerns of evaporating global recovery

Pedestrians are reflected in an electronic stock board outside a securities firm in Tokyo, Japan
Pedestrians are reflected in an electronic stock board outside a securities firm in Tokyo, Japan

Thomas Molloy

IRISH shares fell, with many heavyweights posting large declines, after the Federal Reserve said the US economy's recovery is likely to be "more modest" than forecast and the Bank of England cut its UK growth estimate. Shares elsewhere fell for the same reasons.

The ISEQ tumbled 80.58 points, or 2.7pc, to 2878.67 points -- its biggest drop since July 1. Companies with a large exposure to UK and US economies were among the worst decliners. Among those exposed to the US economy, CRH slid 4.3pc to €15.51, Glanbia fell 3.4pc to €3.28 and Elan slipped 3.6pc to €3.90. Decliners with exposure to the UK economy included Ryanair, which closed down 4.3pc to €3.73 and Greencore, which fell 3.9pc to €1.27. Aer Lingus finished the session down 7pc at 90c following news of industrial action by staff.

"The fact that the recovery may be stalling is clearly the most pressing concern," said Deirdre Ryan, an economist at Goodbody Stockbrokers. "This downgrade of the outlook follows a similar downgrade at the previous meeting in June."

Bank of Ireland outperformed the market, slipping 0.5c to 84c as it unveiled first half results and said it hopes not to need the government guarantee scheme next year.

It was the same story elsewhere with investors worrying about the prospects for growth after the Federal Open Market Committee said late on Tuesday that it will reinvest proceeds from maturing mortgage-backed securities in long-dated US Treasuries, marking the Fed's first attempt to bolster growth since March 2009 as it tries to keep the slowing US economy from recession.

National benchmark indexes declined in all 18 western European markets. France's CAC 40 slid 2.7pc and Germany's DAX sank 2.1pc. The UK's FTSE 100 retreated 2.4pc as consumer confidence fell and the Bank of England cut its growth forecast. The dollar made its biggest one-day gain in nearly two years against most major currencies on the renewed worries of an economic slowdown, while commodity prices fell.

Oil prices slid more than $2 to below $79 per barrel on fears that a global economic slowdown will reduce demand for raw materials.

"The world is going to be a pretty tough place for the rest of the year," said Andy Lynch, fund manager at Schroders in London. "America is a source of potential material problems for the rest of the year."

Shares in almost every sector suffered. Mining giant Rio Tinto lost 3.1pc, oil producer Shell sank 2.3pc and HSBC slid 1.9pc. Lloyds slumped 6.8pc while Standard Life declined 3.6pc after saying operating profit rose 10pc, missing analysts' estimates as earnings from pensions slumped.

Irish Independent

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