Surging bond yields peg markets back

Fri, Jun 15, 2012, 01:00

EUROPEAN MARKETS moved lower yesterday as the perfect storm of surging Spanish and Italian bond yields and a looming Greek election raged on.

However, a Dublin broker said that a lot of bad news is already priced into markets. “A lot of money is under the mattress, so to speak, at this stage,” he said.

US markets strengthened yesterday as speculation grew that the Federal Reserve will loosen monetary policy next week in a bid to stimulate growth.

DUBLIN

THE ISEQ index just managed to stay above the psychologically-important 3,000 level yesterday, having slipped 0.5 per cent to 3,006.43.

With the recent spate of results and agms now over, there was little stock-specific news to give the market direction. “Corporate Ireland has said what it has to say,” a Dublin trader said.

Bellwether stocks CRH and Ryanair retreated on the day and weighed on the index. The cement giant shed more than 1 per cent, or 15 cent, to finish at €13.65 while the low fares airline closed 1.2 per cent, or 4.8 cent, down at €3.83.

Food ingredients group Kerry tumbled almost 52 cent, on strong volume, to €34.94.

LONDON

UK STOCKS declined as Spanish borrowing costs surged to a euro-area record. Mining companies paced the retreat.

The FTSE 100 declined 0.3 per cent to 5,467.05 at the close in London, following two days of gains. The broader FTSE All- Share Index slipped 0.2 per cent

Glencore International led mining companies lower, falling 3.8 per cent to 341.7 pence.

Xstrata dropped 2.2 per cent to 899 pence.

Vedanta Resource slid 1.4 per cent to 903 pence and Antofagasta fell 1.5 per cent to 1,054 pence.

BSkyB dropped 3.5 per cent to 671 pence in London trading, paring losses of as much 8.3 per cent. BT lost 3.5 per cent to 201.7 pence after the companies paid almost double the current price for the rights to broadcast 154 soccer games.

“We got it wrong on Premier League rights,” wrote Deutsche Bank analysts Laurie Davison and Mark Braley in a note to clients yesterday as they cut BSkyB’s 2014 earnings estimates by 8 per cent. “Forty per cent inflation blew out our expectations for flat costs.”

Mulberry tumbled 23 per cent to 1,560 pence, the biggest decline since 1998.

The maker of luxury leather goods reported full-year revenue of £168.5 million, missing the average analyst estimate of £175.3 million.

Pre-tax profit of £36 million also fell short of forecasts.

Burberry, the UK’s largest luxury-goods company, slid 3.2 per cent to 1,298 pence.

EUROPE

EUROPEAN STOCKS dropped for a second day as Moody’s downgraded Spain and Cyprus, while Switzerland’s central bank said that Credit Suisse Group must increase its capital this year.

Germany’s DAX slipped 0.2 per cent.

France’s benchmark CAC 40 added 0.1 per cent.

Greece’s ASE Index rallied 10 per cent for its biggest climb since August.

Bayerische Motoren Werke, the world’s biggest maker of luxury vehicles, dropped 2.6 per cent to €56.29.

Daimler, the third-largest maker of luxury autos, decreased 2 per cent to €33.60. Morgan Stanley reduced its earnings-per-share prediction for the carmakers by 5 per cent to 10 per cent for2012 to 2014.

National Bank of Greece, the country’s largest lender, soared 26 per cent to €1.31 euros as bets showed that New Democracy, the party that backs the terms of both bailouts from the European Union, may win the election on June 17th.

Petropavlovsk surged 14 per cent to 469.9 pence, its largest rally since October 2009.

The Russian gold producer increased its production target for 2012 by 20,000 ounces.

US

US stocks jumped yesterday after news major central banks are preparing co-ordinated action if the results of Greek elections this weekend generate turmoil in financial markets.

The central banks from major economies will take steps to stabilize markets and prevent a credit squeeze, Group of 20 officials told Reuters.

The news late in the trading day invigorated a market that has been highly volatile this week, whip-sawed by concerns the ballot in Greece on Sunday may set the stage for the countrys exit from the euro zone.

Energy was the top-gaining SP sector, rising 1.7 per cent, helped by a 2 per cent rise in U.S. crude oil prices.

Chevron was a top boost to the Dow, up 1.8 per cent to $101.92.

Some of the initial pop in prices faded into the close, however, with Wall Street seen still subject to sharp swings.

The Dow hit an intraday high up 1.6 percent but closed up 1.2 percent at 12,651.91. The SP 500 ended up 1.08 per cent at 1,329.10. – (Additional reporting Bloomberg/Reuters)