US figures fail to dent confidence

THE ISEQ index led European markets higher yesterday, as positive investor sentiment withstood disappointing US consumer confidence figures.

Yesterday’s session represented the fourth straight day of gains for European equities, extending their highest level since July.

Dublin

The Iseq index gained more than 1 per cent yesterday, closing just shy of 3,360.

Brokers reported a marked move upwards from lunchtime onwards. This rally was unimpeded by the release of US consumer confidence figures mid-afternoon which fell short of consensus expectations.

In terms of stock-specific moves, CRH was better on the day, gaining 10.5 cent to finish just under €16.79. One analyst said this move may have been due to some “index action” yesterday, as the building materials stock was coming out of one index in Europe, and going into a British index. Drug manufacturer Elan continued to gain ground yesterday, jumping more than 5 per cent to €11.00 as recent buyer interest in the stock remained strong. Food stock Glanbia was another winner on the day, jumping 2.6 per cent, or 15 cent, to €5.85.

London

UK stocks rose, snapping two days of declines, as banking shares pulled the benchmark FTSE 100 index higher.

HSBC and Standard Chartered led gains, advancing at least 1 per cent each. Tullow Oil gained 3.9 per cent after saying it found oil at a well in Africa.

Soco International fell 1.5 percent after Oriel Securities cut its rating on the stock.

The FTSE 100 Index added 0.4 per cent to 5,965.58 at the close in London. The measure has gained 7.1 per cent this year. The broader FTSE All-Share Index advanced 0.4 per cent.

“The fundamentals are strong enough,” Patrick Moonen, senior strategist at ING Investment Management, said. “Both the systemic risk and recessionary risk have declined. There’s room for this risk premium to decline further and for valuations to move up.”

British stocks gained 1.3 per cent this week after reports showed the US economic recovery is strengthening and euro area finance ministers approved a second bailout for Greece.

Europe

European stocks ended higher yesterday, climbing for the fourth straight day and hitting their highest level since before the market’s slump in late July, as demand for the region’s equities recovered while sovereign debt fears abated.

Insurers helped drive the gains, with AXA up 1.9 per cent and Allianz up 1.6 per cent, a day after winning concessions in the EU’s tough new capital rules, potentially saving the sector billions of euro. The FTSEurofirst 300 index of top European shares ended 0.4 per cent higher at 1,106.79 points, posting a weekly gain of 2.5 per cent

“The tension has dropped and risk premiums have fallen. The LTRO was a game changer, and investors see the glass half full now,” said Jean-Marie Mercadal, chief investment officer of OFI Asset Management. “That said, technically, the market is ‘overbought’ and it’s dangerous to chase the rally after such a rise. I wouldn’t be surprised to see 5-10 per cent pullbacks in the next few weeks, which will offer entry points that investors should use to significantly increase their exposure to the asset class.”

The improvement in confidence was also reflected in a sharp drop in implied volatility, with the Euro Stoxx 50 volatility index, Europe’s “fear gauge” known as the Vstoxx, plunging to a low of 17.26 during the session, a level not seen since late 2007.

Around Europe, Britain’s FTSE 100 index gained 0.4 per cent, Germany’s DAX index added 0.2 per cent, and France’s CAC 40 climbed 0.4 per cent.

Cyclical shares such as miners were in demand, with Rio Tinto adding 0.9 per cent and Anglo American gaining 1.4 per cent, while investors shed shares seen as defensive, such as pharmaceutical groups GlaxoSmithKline, Novartis and Roche, down 0.3-0.5 per cent.

Nokia surged 5.2 per cent after the company’s design chief Marko Ahtisaari told Finnish magazineKauppalehti Optio the firm is working on creating a tablet that would stand out among iPad-challengers.

US

US stocks were little changed in early trade yesterday, with the S&P 500 index trading at the highest level since May 2008, as an increase in oil and consumer prices bolstered inflation concern as the economy improves.

Energy shares had the biggest advance in the SP 500 among 10 industries. Noble and Chesapeake Energy increased more than 2.9 per cent.

An increase in oil prices sent airline shares lower. US Airways lost 4.2 per cent to $7.26. United Continental declined 1.7 per cent to $20.05. Bank of America jumped 3.8 per cent, surging 20 per cent in four days. – (Additional reporting: Bloomberg/Reuters)