US fiscal cliff crisis casts global shadow
All eyes were focused on the US yesterday as markets anxiously awaited developments related to the so-called fiscal cliff, a combination of automatic tax rises and spending cuts that is threatening to come into effect next week in the absence of a political deal.
Just days before next Monday evening’s deadline, Senate leader Harry Reid warned America may not have sufficient time to avert the fiscal cliff, weighing on markets in the US, with European markets ending the day more or less flat.
This offset more positive housing and job-benefit figures from the US yesterday.
IRELAND
Like most bourses across the globe yesterday, the Iseq index was open, having closed at lunchtime on Monday.
Trading was predictably quiet, with little stock-specific news to note, and the Iseq was little changed, in line with trading in London.
Some of the big names such as Ryanair, CRH and Smurfit Kappa were the most actively traded stocks. There were some sellers around in Smurfit, which lost almost 2 per cent on the day.
CRH was one of the best performers, adding just under 1 per cent at the close
LONDON
The FTSE was little changed, paring earlier gains, after US Senate majority leader Harry Reid said America looked to be heading for that fiscal cliff.
The FTSE 100 Index rose 0.12 points, or less than 0.1 per cent, to 5,954.3 at the close of trading in London, trimming an earlier increase of as much as 0.7 per cent.
Trading was, unsurprisingly, slow, with the volume of shares changing hands in FTSE 100 companies 40 per cent lower than the 30-day average, according to Bloomberg.
Evraz , the Russian steelmaker partly owned by Roman Abramovich, advanced 2 per cent after winning approval to increase its stake in Russian coal producer OAO Raspadskaya.
Royal Bank of Scotland led banks higher, gaining 2.5 per cent to 325 pence. Reckitt Benckiser Group, the maker of Lysol cleaners and Nurofen painkillers, fell 1.3 per cent.
Diageo, the world’s biggest distiller, dropped 1 per cent to 1,809.5 pence, in line with a weak day for the food and beverage sector generally on the Stoxx 600.
EUROPE
European stocks were little changed as positive US jobless-benefit claims and home sales figures offset US Senate majority leader Harry Reid’s comments that a budget deal was unlikely.
National benchmark indexes climbed in 13 of the 18 western European markets.
France’s CAC 40 rallied 0.6 per cent, Germany’s DAX advanced 0.3 per cent and the UK’s benchmark FTSE 100 was little changed.
Bankia SA plummeted 20 per cent as Spain’s bank-rescue fund said its parent company had a negative value of €10.4 billion.
Clariant AG, a Swiss chemical company, rose 3 per cent after selling three units.
Bayerische Motoren Werke AG gained 1.1 per cent to €73.46.
Chief financial officer Friedrich Eichiner said he was confident the carmaker had surpassed its 2011 profits.
US
There was mixed news from the US yesterday. While new-home sales climbed to a 377,000 annual rate in November, the most since April 2010, and job-benefit claims fells, the Senate majority leader Harry Reid’s comments on the fiscal cliff spooked markets.
US stocks retreated for a fourth day, while treasuries gained on the back of Mr Reid’s remarks.
Financial stocks lost ground.
Bank of America, the second-largest US bank by assets, slumped 2.5 per cent to $11.25 by early afternoon, while. JPMorgan Chase, the largest, lost 2 per cent to $43.09. JC Penney slumped 5.8 per cent to $19.55 for the biggest drop in the benchmark US equity index. – (Additional reporting: Bloomberg)