Shares dip as tension over North Korea makes investors nervy
Pan-European Stoxx 600 index and euro zone blue chips both fall 0.5 per cent
Traders working on the floor of the New York Stock Exchange recently. US markets were closed on Monday. Photographer: Michael Nagle/Bloomberg
News of North Korea’s latest nuclear test hit European shares on Monday but failed to trigger a massive sell-off as investors seem to be used to geopolitical tensions. The pan-European Stoxx 600 index fell 0.5 per cent and all major bourses, from the UK’s FTSE to France’s CAC 40, posted declines from 0.3 to 0.8 per cent.
“Equity markets in Europe are in the red today as tensions surrounding North Korea were heightened again on the back of the nuclear bomb test carried out by the regime over the weekend,” said David Madden from CMC Markets. “Traders are clearly nervous, as stocks are lower, but the sell-off today hasn’t been as bad a previous ones.”
The Iseq was down 32 points at 6,676, which roughly tallied with movements elsewhere. Drinks manufacturer C&C rose nearly 1 per cent to €3.05 following the news that it is to invest in the UK pub group Admiral, in a deal that will give the Irish drinks manufacturer “significant economic” benefits in the British market. Stephen Glancey, C&C chief executive, said the deal was “an attractive opportunity to create a new long-term investment in the important on-trade channel, without taking significant financial and operational risk”.
Ryanair was down marginally at €18.05 despite a HSBC report suggesting further consolidation in Europe’s airline industry on foot of recent bankruptcies was likely to improve profitability.
Permanent TSB was up 0.6 per cent at €1.76 while rivals Bank of Ireland and AIB were down marginally at €6.95 and €5 respectively. Insulation maker Kingspan, which has enjoyed a strong few weeks, was down slightly at €32.87.
The FTSE 100 Index closed down 27.03 points to 7411.47, after Pyongyang detonated a hydrogen bomb underground on Sunday, sparking calls from UN Security Council members for further sanctions against the authoritarian nation. US ambassador to the UN Nikki Haley said North Korea’s relentless actions show that its leader Kim Jong Un is “begging for war”, and the time had come for the council to adopt the strongest diplomatic measures.
Traders sought out safe haven stocks with silver miner Fresnillo rising close to 3 per cent, or 47p to 1,664p, and Randgold Resources lifted 160p to 8,070p. The price of gold was 0.7 per cent higher at 1,334 US dollars an ounce.
The outcome was also taking its toll on housebuilding stocks, with Taylor Wimpey and Barratt Developments slipping 3.4p to 198.3p and 10p to 617.5p respectively.
Household goods giant Reckitt Benckiser said four executives are to leave the firm as it looks to bounce back from sluggish sales and a recent cyber-attack. Chiefs at its information technology, human resources, developing markets and marketing departments have all resigned from Reckitt, which is also behind products such as Durex and Dettol.
Uncertainty over the response to the latest North Korean test worried investors, leading to a spike in stock market volatility. Europe’s volatility index was up 1.5 points. While no sector in Europe ended in positive territory, stocks in the financial services industry had the worst day, losing 1 per cent.
Fiat Chrysler fell 1.3 per cent after chief executive Sergio Marchionne said the carmaker had not received an offer for the company nor was it working on any “big deal”. His comments cooled down talk of possible M&A deal that had sent the stock to record highs last week.
Pharma heavyweight Novartis ended down 1 per cent as the group said its chief executive, Joseph Jimenez, would retire in 2018, and chief drug developer Vasant Narasimhan, would run the company from February.
Novartis shares, which have the third largest weight on the MSCI Europe benchmark, have underperformed their sector over the last 10 years.
US markets were closed on Monday.
– (Additional reporting by Reuters and Bloomberg)