Markets lose faith in ECB, Fed moves

EUROPEAN markets retreated yesterday as investors decided that the rallies sparked by initiatives from the European Central Bank and the Federal Reserve have been overdone.

“While central banks solved the liquidity problem, the fundamental issues haven’t been solved as southern Europe remains uncompetitive,” said Jeppe Christiansen, the chief executive officer of Copenhagen-based Maj Invest, which manages $7.4 billion.

DUBLIN

AS USUAL, the Irish market more or less reflected its European peers. Packaging group Smurfit Kappa, which announced a €250 million refinancing round, was one of the better performers, adding 1.11 per cent to close at €7.5888. The stock has gained almost 8 per cent in the last week.

Index heavyweight the international building materials group CRH, which accounts for about a third of the Iseq, slipped 0.97 per cent to €15.31. Bookmaker Paddy Power gained 2.27 per cent to close at €56.40.

DIY specialist and builders’ merchant Grafton, whose subsidiary Atlantic Homecare is due to emerge from examinership this week, slid 1 per cent to end at €3.36.

LONDON

LONDON’S benchmark FTSE 100 fell 0.4 per cent at the close, paring an earlier drop of as much as 1 per cent.

Volex, which makes power cords for computers and other devices, plunged 27 per cent to 187.5 pence, the biggest fall since January 2008. The company said operating profit for the year ending March 31st would be broadly in line with the last financial year due to a recent unexpected drop in demand from its largest customer in the consumer sector.

Aviva fell the most on the FTSE 100, down 4 per cent to 344.9 pence. Bank of America downgraded the UK’s second-largest insurer to underperform from neutral.

RBS led a gauge of bank shares lower, down 2.7 per cent to 267.1 pence. The shares had surged 23 per cent over the previous two weeks. Lloyds lost 2.5 per cent to 38.86 pence and Barclays fell 1.1 per cent to 225.4 pence.

A gauge of commodity stocks retreated for a second day as copper led metals lower. BHP Billiton, the world’s largest mining group, lost 1.4 per cent to 1,996.5 pence, while Rio Tinto, the third-biggest, was down 0.7 per cent to 3,193.5 pence.

Diageo gained 2.1 per cent to 1,718 pence after Morgan Stanley named the stock as one of the four “European staples” to own over the next six months.

EUROPE