Italian banks sink on early election worries

Activity was much reduced on Monday as holidays in major markets such as Britain and the United States kept investors away.

DUBLIN

In the Republic the Iseq index was essentially unchanged for the day, down 15 basis points. In terms of stock moves, there was a minor sell-off in Ryanair, which was down about 1 per cent on the day ahead of earnings results it will publish Tuesday. It had closed at about €18 on Friday.

"Ryanair was very illiquid as most of its fund managers are based in the UK where there was a holiday," said a Davy analyst.

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Applegreen traded up 2 per cent. "A statement showed trade for the first four months of the year was strong with a significant pipeline of opportunity both in the core market in Ireland and the UK," said the Davy analyst.

On property, Ires Reit was up 1 per cent on low volume, while other companies were largely unchanged.

Aryzta was down 2 per cent ahead of quarterly results to be published Tuesday. Glanbia, after placing shares at €17.80 last week, traded up to €18.05.

EUROPE

Concern over Italy’s banks and Britain’s national election dominated holiday-thinned European financial markets on Monday, pushing stock markets lower after Asian share indices fell back off two-year highs.

Sterling, hammered by a slump for prime minister Theresa May’s Conservatives in opinion polls last week, recovered after weekend polls confirmed the trend but showed her still on course to win next week’s vote.

European share prices were lower overall, and Italian banks and blue chips fell as worries over recapitalisations of regional Italian lenders bled over into a second week.

Weekend reports that Italy’s main parties could converge on a proportional electoral law pointed to growing chances of an early election that may yield an indecisive hung parliament. “The risk of early elections has suddenly increased to 60 per cent,” LC Macro Advisers founder Lorenzo Codogno said. “A hung parliament is thus the most likely outcome.”

European blue chips overall slipped 0.2 per cent, but losses for Banco BPM, Unicredit and others drove a 3.4 per cent loss for Italy's banking index – its biggest in nearly four months. Milan's main blue-chip index fell almost 2 per cent, while Germany's DAX was little changed.

ASIA

Asian markets were also lower after some early gains that largely shrugged off another missile launch by North Korea, the broad MSCI index of Asia-Pacific shares outside Japan dipping 0.2 per cent.

Japan’s Nikkei edged up 0.2 per cent, while Australian shares fell as much as 0.8 per cent, hit by another round of falls in the prices of oil and other commodities. China’s markets are also closed on Monday and Tuesday for a holiday.

US

On currency markets the dollar was flat, trading at $1.1185 per euro and 111.35 yen after steadying on a better batch of US economic data on Friday that solidified expectations of a rise in official interest rates next month.

San Francisco Federal Reserve president John Williams said in Singapore on Monday that medium-term trends in US inflation remained "pretty favourable," despite some recent soft consumer price data.

After falling more than 2 cent last week, sterling was 0.2 to 0.3 per cent stronger against the dollar and euro. “A lot of what we are seeing is the after effects of Friday’s news and data releases,” said Thu Lan Nguyen, a currency strategist with Commerzbank in Frankfurt.

"We have a little bit of dollar strength following better US data and some hawkish comments from Federal Reserve officials. And we have a little bit of a pound recovery following the latest poll results from the UK." – Additional reporting: Reuters