Air Berlin insolvency filing causes market turbulence

Airline shares climb in Europe as investors speculate on likely winners from insolvency

 Air Berlin, Germany’s second largest airline, has filed for insolvency proceedings. Photograph: EPA/Alexander Becher

Air Berlin, Germany’s second largest airline, has filed for insolvency proceedings. Photograph: EPA/Alexander Becher

 

Airline shares climbed across Europe on Tuesday as investors speculated over the like winners in the fallout from Air Berlin’s insolvency. However, a retreat in resource stocks left markets little changed at the end of the day.

DUBLIN

Ryanair climbed 3.44 per cent as investors pegged it as likely to boost market share on rival Air Berlin’s insolvency. Buyers mopped up about two million of its shares.

Bookmaker Paddy Power Betfair gained 0.96 per cent following a move for the stock in London prompted by a view that rule changes in the UK will affect it a lot less than its peers.

Index heavyweight building materials giant CRH had a good day, gaining 1.7 per cent to close at €29.815.

Hibernia Real Estate Investment Trust added 1.44 per cent to €1.477. Dealers said the stock had been making steady ground in recent weeks.

AIB advanced 3.5 per cent to break through the €5 mark, closing at €5.051. Traders noted that volumes were weak, and suggested it was hard to say how long it would remain above that benchmark. Bank of Ireland followed suit, adding 1.38 per cent to €7.117.

LONDON

Here the Irish bookie Paddy Power Betfair gained 1.42 per cent to close at 7,475p sterling. Investors believe that the company is unlikely to suffer as much as rivals should the UK government introduce new rules limiting the amounts that can be wagered in betting machines in high street bookmakers.

Rival William Hill fell 1.26 per cent to 243.7p, while Ladbroke Coral was off 0.09 per cent at 116.7p. Changes to betting machine rules could be announced in October.

EasyJet jumped as much as 4.5 per cent after Air Berlin filed for insolvency and a source said the airline was in talks to snatch some of the failed airline’s assets. It closed 1.23 per cent up at 1,280.5p. Aer Lingus parent IAG also jumped 2.9 per cent to 631p.

Irish-based Tullow Oil fell 5.71 per cent to 153.6p after a fall in crude oil prices. Miners Randgold Resources and Fresnillo led losers, down 3 per cent to 3.2 per cent as weaker Chinese housing sector data weighed on commodities stocks across the market.

Next fell 3.1 per cent after Berenberg downgraded its rating on the retailer to “sell” from “hold”. Laura Ashley shares slid 18 per cent to 9p after the homeware and fashion chain said a property writedown would knock £2.8 million (€3m) off full-year earnings.

EUROPE

Air Berlin shares tumbled after Germany’s second biggest carrier filed for insolvency following the withdrawal of shareholder Etihad’s financial support. The stock closed 36.14 per cent down at 50 cent after hitting a low of 35 cent earlier in the day.

The news boosted Lufthansa, which is bidding for parts of its business, and other rivals that investors judged were likely to pick up market share and possibly valuable airport slots. Lufthansa closed 4.73 per cent up at €20.59, making it Europe’s best performing stock on Tuesday.

Danone gained 1 per cent after a media report that activist fund Corvex Management owned a stake in the French yoghurt maker.

Norwegian consumer publishing firm Schibsted was the biggest faller, down 5.7 per cent after hitting an eight-month intraday low, after Facebook announced new marketplace services which analysts said could threaten its classifieds business.

German potash miner K+S dropped 5 per cent after saying it was unlikely to reach its 2020 earnings EBITDA target, blaming a slow recovery of potash prices.

US

Wall Street was little changed in early afternoon trading on Tuesday as losses in Home Depot and other consumer discretionary stocks limited gains on key indices. Home Depot’s 3.9 per cent fall weighed the most.

Although the home improvement chain reported strong earnings and raised its forecast, investors appeared to be worried about supply constraints in the housing market that could be a drag on Home Depot’s future earnings.

Shares of smaller rival Lowes Cos were down more than 3 per cent, and it was the second biggest loser on the S&P.– Additional reporting: Reuters