Wednesday 17 January 2018

Uncertainty over bailout for Spain weighs on European markets

John Mulligan

John Mulligan

Will he, won't he? Markets remained fixated on when -- not if -- Spain's Prime Minister, Mariano Rajoy, will cave in and finally admit it needs to be bailed out. He has again insisted that a request for aid is not imminent. It's just that no-one really believes him.

The uncertainty surrounding Spain, coupled with other macro-economic concerns, colluded to weigh on European bourses yesterday.

Chinese services industries expanded at the weakest pace in September since March 2011, while euro-area services and manufacturing output contracted for an eighth month.

In the US, stocks received a boost as new data showed more new jobs were created in September than had been anticipated by analysts. Official government figures are out tomorrow, however.

"It's a good sign when the market starts reacting to macro data again," said Anja Hochberg, head of investment strategy at Credit Suisse in Zurich.

"The latest economic numbers show that the economy is bottoming out. However -- and this speaks for an even bigger upside potential of the markets -- the economic hopes still need to show in real terms. The sentiment is not yet exhausted. One more reason to invest in equities."

At home, the Live Register dropped minutely during September to leave the unemployment rate at 14.8pc, while the country was the only one in the eurozone to deliver business activity growth in September. Its PMI figure climbed to 53 and is at a 17-month high.

The ISEQ Overall Index added 11.5 points, or 0.35pc, to end the day at 3,311.15. It's not far off a high this year of 3,359 that it hit in March.

Modest gains were the order of the day, just outweighing declines. The biggest winner of the day was Russia-focused Petroneft Resources. The exploration minnow added 13.1pc, or 1.1 cent to finish at 9.5 cent. That gain came even as oil prices softened over economic concerns. It's due to complete its merger with Melrose Resources next week.

Conversely, shares in Providence Resources declined 3.1pc, or 28 cent, to €8.52.

Shares in packaging giant Smurfit Kappa were virtually flat at €8.05. Private equity groups Cinven and CVC Capital Partners told the stock exchange that an entity controlled by them has sold about 10 million shares in Smurfit, to bring its stake to just under 3.7pc from above 8pc.

The move follows a sale by another private equity stakeholder in Smurfit -- Madison Dearborn Partners -- last week.

Cancelled

National benchmark indices fell in half of the 18 western European markets yesterday. France's CAC 40 retreated 0.2pc, the UK's FTSE 100 gained 0.3pc, while Germany's DAX rose 0.2pc.

Sodexo climbed 2.3pc to €60.83 in Paris after Credit Suisse raised its recommendation for the world's second-biggest provider of catering services to outperform, the equivalent of buy, from neutral.

EasyJet rallied 3.5pc to 615p, the highest price since January 2008, after saying full-year earnings beat its projections following a surge in demand for flights from London after the end of the 2012 Olympic Games.

FirstGroup plunged a record 21pc to 193.4p. The UK Department for Transport cancelled the west coast competition to run trains from London to Scotland citing the discovery of "serious technical flaws" in the franchise process. FirstGroup had won the route in August from billionaire Richard Branson's Virgin Group.

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