Stocks take a tumble on warnings of US interest rate rise

Early warning signs of a US interest rate rise sent stocks falling on Thursday as investors shifted to bonds.

Minutes of the Federal Reserve’s December meeting indicated that inflation and a squeeze on labour could prompt the US central bank to boost borrowing charges earlier than expected.

DUBLIN

The Irish market outperformed some European peers and trailed others as investors sold leading stocks on Thursday, dealers said.

Building materials giant and index heavyweight CRH slid 2.07 per cent to €44.95.

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Traders said the risk of rising interest rates left investors generally cautious about construction stocks as borrowing funds most of the industry’s activities.

Insulation specialist Kingspan also suffered, closing 1.06 per cent down at €102.55.

House builder Glenveagh Properties fell 1.46 per cent to €1.212 but rival Cairn was largely unchanged at €1.158.

The banks bucked the trend as rising borrowing charges are likely to boost lenders’ earnings.

Bank of Ireland rose 1.1 per cent to €5.342, Permanent TSB gained 1.88 per cent to €1.625 and AIB climbed 0.89 per cent to €2.27.

Global betting business Flutter Entertainment, owner of Paddy Power and Betfair, retreated 5.12 per cent to €134.35. Dealers noted that betting and gaming stocks were enduring a volatile period.

Among other stocks, hotelier Dalata lost 2.03 per cent to close at €3.865. Dealers said sentiment drove most trades in Irish stocks on Thursday.

LONDON

Woodies DIY owner Grafton Group tumbled 3 per cent to 1,211p as the prospect of higher interest rates hit building-related stocks. The Irish business is listed in London as it generates much of its revenues from the UK and Europe.

Investors' wariness of construction left British house-builder Persimmon trailing by 2.68 per cent at 2,800p when trade closed on Thursday. Rival Taylor Wimpey shed 1.85 per cent to 174.6p.

Air-cushioned boot maker Dr Martens was left deflated when investor Permira offloaded £257 million worth of its shares. The Docs boots manufacturer slid 10.7 per cent to 376.2p after confirmation of the sale.

Takeaway chain Greggs fell 8 per cent to 3,101p. The fast food merchant said that Covid's fast-spreading Omicron strain was putting pressure on staff numbers, although it described the problem as "manageable".

EUROPE

The pan-European Stoxx 600 index closed 1.3 per cent lower, erasing all gains made in a rally that pushed it to record highs in the first three sessions of 2022.

European technology stocks were hardest hit, falling 2.4 per cent as the prospect of higher rates made future earnings appear less attractive.

However, the prospect of higher borrowing charges boosting banks and insurers added 1.1 per cent to financial stocks.

Société Générale's car leasing division ALD climbed 8.4 per cent to €14.28 after agreeing to buy rival LeasePlan for €4.9 billion to boost its size as the rental market moves towards electric vehicles.

French grocer Carrefour jumped 6.3 per cent to €18.33, leaving it atop the Stoxx 600, following news of a fresh bid for the chain from rival Auchan.

US

US stock indices swung between gains and losses after Federal Reserve minutes struck a hawkish note.

The communication services sector recouped early losses to move 1.2 per cent higher as Facebook owner Meta Platforms jumped 4.1 per cent, also providing the biggest boost to the S&P 500 and the Nasdaq indices.

Mega-cap stocks including Google owner Alphabet, Microsoft, Amazon, Tesla and Apple were mixed in early afternoon trading.

Netflix slipped 1.9 per cent after JP Morgan cut its price target on the streaming platform's stock.

Lenders fared well in early trade, with banks collectively gaining 1.8 per cent, tracking the benchmark US 10-year treasury yield, which touched its highest level since April 2021 on Thursday.

Analysts said investors accepted that interest rates would rise, the only question being the timing.

– Additional reporting: Reuters