ECB rate cut fails to impress markets
THE EURO sank to a one-month low and stocks retreated as the European Central Bank yesterday disappointed investors anticipating a more aggressive effort to fight the debt crisis.
A Dublin broker described yesterday’s trading as disappointing, saying investors were hoping for a trump card from the ECB to kick things in the right direction.
He added that the cut in lending and deposit rates by China was “unexpected but positive”.
THE ISEQ index closed down 0.12 per cent at 3,215, with Origin Enterprises, Donegal Creameries and UTV among the shares nursing losses.
The airlines both fared well, with Aer Lingus rising 3.37 per cent to €1.07 and Ryanair up 1.54 per cent to €4.07.
It was also a good day for exploration groups, with Providence Resources climbing 3.55 per cent to €6.70, Petroceltic up 11.76 per cent and Ormonde Mining rising 7.95 per cent.
The tide turned for building materials giant CRH though, as the index heavyweight fell 2.06 per cent to €15.21 following gains in recent days. The group accounts for about one-third of the benchmark Iseq index.
UK STOCKS closed little changed as an increase in Bank of England’s bond purchase target and interest rate cuts in Europe and China offset concern that economic risks persist in the euro area.
Xstrata gained 3.1 per cent, leading mining shares higher. Shares in Petroneft rose 5.26 per cent in London with six million shares traded. The share price is up 17.5 per cent since results last Friday.
GKN, a UK maker of components for Airbus SAS jetliners, surged 13 per cent – the most in three years – after agreeing to buy Volvo’s aircraft-engine unit.
Tate and Lyle also rose, increasing 1.6 per cent after Exane BNP Paribas raised its recommendation on the shares to outperform, the equivalent of buy, from neutral.
Dunelm Group gained 3.7 per cent to 531 pence after saying it estimates full-year pre-tax profit at about £96 million, higher than analysts’ estimate of £92 million.
Royal Bank of Scotland and Lloyds Banking Group fell.
The FTSE 100 Index rose 0.1 per cent to 5,692.63 in London.
EUROPEAN SHARES slipped from two-month highs and the euro slumped broadly, hitting a one-month low against the dollar yesterday, after the European Central Bank lowered its benchmark interest rate to a record low.
The ECB cut its main rate below one per cent for the first time, reducing it by 25 basis points to a record low of 0.75 per cent, and cutting its deposit rate to zero, in a bid to tackle the euro zone debt crisis.
Spanish and Italian banks fell as bond yields climbed after the ECB refrained from announcing new measures to support growth.
UniCredit SpA and Intesa Sanpaolo SpA, Italy’s largest banks, slumped 5.1 per cent to €2.81 and 4.4 per cent to €1.04 respectively. Italy’s 10-year government bonds extended their decline, pushing the yield on the securities above 6 per cent.
In Spain, BBVA plunged 4.8 per cent to €5.46 and Banco Santander, the country’s largest lender, fell 3.9 per cent to €5.10.
In Germany, Commerzbank AG led financial shares lower, while Merck KgaA dropped 2.3 per cent after its Erbitux cancer treatment failed to help patients with advanced stomach tumours.
Volkswagen AG climbed 5.1 per cent to €134.50 after it agreed to buy a 50.1 per cent stake in Porsche’s automotive business for €4.46 billion, ending a seven-year takeover saga that has divided two of Germany’s most powerful families.
The DAX Index declined 0.5 per cent to 6,535.56 at the close in Frankfurt. The gauge has still climbed 9.5 per cent from its 2012 low on June 5th
France’s CAC 40 retreated 1.2 per cent, while the Stoxx Europe 600 Index lost 0.2 per cent.
US STOCKS retreated, snapping a three-day advance for the Standard and Poor’s 500 Index, as investors geared up for a jobs report that is likely to show Europe’s crisis is weighing heavily on the US economy.
Earlier gains were driven by data showing fewer Americans than forecast filed jobless claims last week, while companies added more workers than estimated in June. Today’s jobs report may show the weakest quarter for employment in more than two years.
Financial shares had the biggest decline in the SP 500 as Spanish and Italian bonds plunged. JPMorgan Chase and Bank of America dropped at least 2.1 per cent. Equities pared losses as Apple, the world’s most valuable company, rallied two per cent.
Costco, Macy’s, Kohl’s and Target were among the chains that reported disappointing June sales at stores open at least a year. Costco shares were down 0.4 per cent at $94.01 and Target shares fell 0.5 per cent to $57.51. – (Additional reporting: Bloomberg)