Euro zone worries weigh on investors

JAPANESE SHARES are at their lowest level since April 2009, a slump that is testament to the sentiment-sapping force of the euro zone debt crisis and the debilitating impact the fiscal turmoil is seen having on the global economy.

Investors continue to fret about the implications of Germany’s poor debt auction on Wednesday, with some fearing it shows sovereign contagion has reached the very core of the single currency bloc.

But the European session was, for the most part, cautiously positive, as a mild rebound for the euro attracted buyers into a market that has been savagely battered.

The Irish Stock Exchange closed only slightly higher, a gain of just one point or 0.1 per cent, as a trader said it was “one of those messy days” when volumes were light and the US markets were closed due to Thanksgiving Day.

Building materials giant CRH rose 0.2 per cent or just over 2 cent at €12.32 as investors continued buying the stock ahead of its listing moving to the FTSE in London next month.

A trader said there was “a bit of gaming going on” in the stock at the moment as speculators see opportunity ahead of the likes of pension fund having to buy CRH shares when it get its FTSE listing.

Food business Kerry Group enjoyed good trading volumes as it traded up above the €26 mark at one point before closing up 2.7 per cent or 67 cent at €25.77.

Another food stock, Glanbia did not fare as well; the share price fell 2.2 per cent or 10 cent to €4.45.

Building materials group Kingspan rose 2.5 per cent or 15 cent to €6.10, while DIY business Grafton fell 1.4 per cent or 3 cent to €2.33. Pharmaceutical company Elan fell 17 cent or 2.3 per cent to €7.33.

The performance on the stocks were all particularly light as trading volumes are down between 30 and 40 per cent from average levels, said one trader.

Trading across Europe was thin, however, given the holiday on Wall Street, and as the euro’s strength faded, in conjunction with a spike for Italian bond yields, so equities pared gains late into the session.

The FTSE All-World equity index closed down 0.1 per cent – taking its losing streak to nine days, during which the benchmark has shed nearly 9 per cent. Tokyo’s Nikkei 225 fell 1.8 per cent to move below the level hit after the March 11 earthquake.

The FTSE Eurofirst 300 dipped 0.1 per cent, tracking the single currency, which having hit a session high of $1.3411, fell to a seven-week low of $1.3315, and is now down 0.1 per cent at $1.3325.

In London, investors were fearful of extending a brief flurry of bargain hunting into a broader rally, and as early gains faded it was the cheap, recently sold stocks that remained in the ascendancy and the defensive sectors that came under pressure.

“The main losers have been the more defensive shares that have outperformed in the last eight days, while the main gainers have been the more cyclical sectors, financials and miners, which have borne the brunt of the loses,” said Michael Hewson at CMC Markets.

The main FTSE 100 was down 12 points or 0.2 per cent by the close at 5,127.57, extending its worst losing streak since 2003 to nine consecutive days.

“The sheer weight of selling we’ve seen of late may have pushed the bears to the point of exhaustion – at least for now,” Terry Pratt, a trader at IG Markets, said.“The big macro stories continue to loom large: the failed German bond auction stands to haunt markets for some time yet, while the prospect of another ratings downgrade on the US will weigh,” Mr Pratt said.

Among the financials, Barclays Bank climbed 3.1 per cent to 152.5p, while Royal Bank of Scotland added 3.6 per cent to 17.97p and Lloyds Banking Group gained 4 per cent to 22.72p.

In the mining sector, Kazakhmys climbed 2.4 per cent to 807.5p, while Vedanta Resources rose 2.8 per cent to 955p.

The days earnings news was from the mid-cap sphere, but nonetheless significant as Dixons, the electrical retailer, delivered its verdict on consumer confidence and the outlook for discretionary spending in the light of recent developments at travel agent Thomas Cook.

Dixons first-half loss widened, but not at badly as had been feared, leaving its shares up 7.1 per cent at 10.02p. The owner of the Currys and PC World chains said it was taking market share from its rivals and that it had reduced its debt by one-third to £143.2 million.

Kesa Electricals, which recently abandoned its loss making UK Comet chain after same store sales fell 19 per cent in the second quarter, rose 5.8 per cent to 84.85p.

Thomas Cook, which on Tuesday said it was renegotiating its credit lines as profits had been severely squeezed by the spending slowdown and political turmoil in some of its key destinations, rose another 47 per cent to 16.35p after losing three-quarters of its share value in Tuesday’s session.

The euro pulled back as investors expressed disappointment at no positive news on tackling the debt crisis from the meeting between French president Nicolas Sarkozy, German chancellor Angela Merkel and Italian prime minister Mario Monti. – (Copyright The Financial Times Limited 2011)