Markets respond to positive US data

WITH MOST European markets closed yesterday for the May Day holiday, activity was light on the exchanges that were open. However, positive economic data in the US, combined with strong results for UK bank Lloyds, saw markets advance on the day.

DUBLIN

WITH MARKETS closed across Europe, Dublin was particularly quiet yesterday on a day of little news-flow, but managed to finish the day up by just over 1 per cent.

The main action was to be found in Aer Lingus. It opened up on a “bit of volume”, according to one broker, following the revelation that Abu Dhabi-based airline Etihad had built up a 3 per cent stake in the airline, with a view to setting up a code-sharing partnership between the two. It edged up in the morning, before falling back into the close, but was nonetheless up by 2 cent, or 1.8 per cent, on the day at €0.99.

Ryanair also advanced on the back of the news, adding 10 cent, or 2.2 per cent to climb to € 4.35, after it declared that it would welcome “any other financially strong” airline/investor that might acquire the Government’s 25 per cent stake in Aer Lingus.

Elsewhere, CRH was also strong on the day, adding 21 cent, or 1.3 per cent, to finish up at €15.52, while DCC extended its gains by 23 cent, or 1.2 per cent, to advance to € 19.33.

Elan was buoyant once more, adding 20 cent, or 1.9 per cent to close up at €10.65.

Kingspan gave up some of its recent gains yesterday, retreating by 10 cent, or 1.3 per cent, to finish down at €7.78.

Drinks group C&C lost 2 cent yesterday, or 0.6 per cent to fall back to € 3.77, while Glanbia was also weak. It lost 4 cent or 0.7 per cent to finish down at € 5.70.

LONDON

BRITAIN’S TOP share index jumped by more than 1 per cent on Tuesday after stronger than expected US manufacturing data gave a lift to global growth hopes, pulling commodity stocks higher.

At the close, the FTSE 100 index was up by 74.5 points, or 1.3 per cent at 5,812.23, ending above the 5,800 level for the first time since April 3rd.

Volumes, however, were fairly low in London, at below 70 per cent of the 90-day daily average, on the back of closed European markets.

Banks were in demand as investor risk appetite returned. Shares of Lloyds rallied by more than 8 per cent, after the part state-owned lender reported a £288 million pretax profit for the first quarter, significantly better results than a year ago. Its shares had fallen by up to 10 per cent in the run-up to the results. The bank warned of a long, hard economic recovery and said it would set aside another £375 million to cover compensation for people who were mis-sold insurance. But it also said it was making progress in reducing its loan book, cutting costs and reining in bad debts – all key parts of its recovery plan.

Royal Bank of Scotland, which will unveil its first-quarter numbers on May 4th, added 4.2 per cent. As of Monday, European quarterly earnings were enjoying a better start than for the previous quarter, although results remain mixed, with 55 per cent of companies that have reported so far having met or beaten expectations.

Hedge fund manager Man Group was the biggest FTSE 100 loser, tumbling 5.5 per cent after it said clients withdrew a net $1 billion in the three months to March.Retailers also suffered ahead of trading news. Next, which issues a first-quarter trading update on Wednesday, fell 1.1 by per cent, while mid-cap Home Retail Group shed 5.3 per cent, with its full-year results due tomorrow.

NEW YORK

US STOCKS advanced yesterday, sending the Dow Jones Industrial Average to the highest level since December 2007, after a better than estimated manufacturing report bolstered investors’ optimism in the world’s largest economy.

Manufacturing unexpectedly expanded in April at the fastest pace in 10 months, driven by gains in orders and production.

Yesterday’s gain extended this year’s rally in the S&P 500 to 12 per cent as investors bought stocks amid better than estimated economic and corporate data.

Former Federal Reserve chairman Alan Greenspan said US stocks offer good value and are likely to rise as corporate earnings increase over time.

“Stocks are very cheap,” said Greenspan at the Bloomberg Washington Summit hosted by Bloomberg Link, citing “very low” price-earnings ratios. “There is no place for earnings to grow except into stock prices,” he added.

Better than expected manufacturing data also helped boost confidence.

“The economy is starting to get on its own two feet,” said Wayne Lin, a money manager at Baltimore-based Legg Mason, adding, “Manufacturing is forward-looking. It leads what the actual economic activity tends to end up being. It tells us that firms are being a bit less conservative. Confidence is starting to re-emerge.” (Additional reporting: Reuters/Bloomberg)