Thursday 14 November 2019

Shares dip as markets disregard IMF growth forecast

John Mulligan

John Mulligan

European shares dipped into the red again yesterday just a day after the International Monetary Fund raised its forecast for global economic growth for 2012.

In what was a busy day for results, markets saw better-than-expected results from companies such as Heineken, but in the US, shares in chip-maker Intel and computer-maker IBM fell after they reduced expectations and missed sales expectations.

Markets were also impacted by signs of a continuation in a slower growth trend in China.

Analysts at Deutsche Bank also warned that if the level of sovereign and corporate defaults occurs that the rising cost of credit default swaps, or insurance against defaults, are implying, then events over the next five years could be even worse than the last five.

The ISEQ Overall Index was one of the few European bourses to end the session by squeaking into positive territory. It had started the day up very slightly and despite a stronger performance at times, ended the day that way too. It closed up just 2.21 points, or less than 0.1pc, at 3,224.85.

Main movers on the day included Kenmare Resources, which advanced 5.5pc, or 3.3 cent, to 62.6 cent. The IMF reckons China's economy will grow 8.4pc this year.

Donegal Creameries, whose shares had been hit hard last week after it reported a sharp fall in profits, soared just over 9pc, or 29 cent yesterday to €3.50. They're still some way below the €3.90 they were trading at just a few weeks ago, however.

Bank of Ireland managed to hang on to gains during the day, closing up 2.6pc at 12 cent, while recruitment firm CPL Resources rose 3.3pc, or 10 cent, to €3.10.

Decliners included drug group Elan, which fell 2.1pc, or 22 cent, to €10.29, while CRH fell 2.35pc, or 30p in London, to £12.49.

National benchmark indices fell in 15 of the 18 western-European markets. France's CAC 40 declined 1.6pc and the UK's FTSE 100 slid 0.4pc. Germany's DAX lost 1pc. Spain's IBEX 35 retreated 4pc to its lowest since March 2009.

Santander, Spain's largest bank, dropped 4pc to €4.81. Banco Popular Espanol fell 3.2pc to €2.39. CaixaBank slid 3.5pc to €2.60. A gauge of European bank shares was the second-worst performer of the 19 industry groups on the Stoxx 600.

Debt crisis

"The debt crisis is far from over still and I think Spain will be worse before it gets better," Henrik Drusebjerg, a senior equity strategist at Nordea Bank, said.

"European leaders need to address the key issues to move Europe out of this crisis ... that is how to create growth under this environment, and that has been almost unaddressed so far during this crisis."

Oil firm Repsol dropped 6.2pc to €15.40. Argentina rejected its demand for $10.5bn in compensation after President Cristina Fernandez de Kirchner seized its YPF unit, claiming it hasn't invested enough in the South American country.

Heineken advanced 2.5pc to €43.35 after reporting first-quarter revenue of €3.83bn, beating analysts' estimates of €3.74.

Iberdrola dropped 7.9pc to €3.59, its lowest since November 2003, after Actividades de Construccion & Servicios sold a 3.7pc stake in Spain's biggest power company to cut debt.

ASML Holding, Europe's biggest semiconductor equipment maker, fell 1.6pc to €37.33 after failing to provide forecasts for future orders.

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