European markets recover ground after Bank of England intervention

European shares gained on Wednesday, with the UK’s blue-chip FTSE 100 index reversing losses after the Bank of England said it would purchase bonds to cool turmoil in markets stemming from the UK government’s fiscal plans.

In a dramatic intervention, the Bank of England said it would buy as many long-dated government bonds as needed between now and October 14th to stabilise financial markets, adding that it would postpone next week’s start of its gilt sale programme.

Its move came after the International Monetary Fund and ratings agency Moody’s ramped up pressure on the UK to reverse a new economic strategy revealed last week which proposed unfunded tax cuts, prompting a surge in bond yields and a searing drop in the pound.

Dublin

The Iseq index finished 0.5 per cent lower on the volatile day for European markets, with Bank of Ireland one of the main fallers. Its stock declined 4.8 per cent to €6.70 on a day when The Irish Times reported that the Central Bank is set to impose a fine amounting to tens of millions of euro on Thursday for the lender’s role in the State’s tracker mortgage scandal.

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Building materials group CRH dropped 1.1 per cent to €33.19, while insulation-maker Kingspan was down 0.9 per cent at €47.90 and Ryanair was flat at €10.85. Packaging group Smurfit Kappa was among the stocks to post gains, rising 0.5 per cent to €29.97.

London

The FTSE 100 index erased steep session losses to close 0.3 per cent higher, while the mid-cap index cut all of its bruising 3 per cent plunge, finishing 0.1 per cent higher, after the Bank of England’s promise of bond purchases lifted sentiment. Under-pressure sterling also recovered some ground.

As copper prices recovered, mining stocks were the biggest boost to the FTSE 100, followed by healthcare and energy stocks. Weighing on the index, rate-sensitive banking stocks declined 2.5 per cent.

Luxury fashion house Burberry Group rose 5 per cent after announcing Daniel Lee as its new chief creative officer. Online fast-fashion retailer Boohoo fell sharply after it reported a slump in revenues, however its share price rebounded later in the session and the stock closed up almost 8 per cent.

Europe

The continent-wide Stoxx 600 index closed up 0.3 per cent after falling nearly 2 per cent earlier in the session as an intensifying energy crisis in the region and the relentless surge in global bond yields fuelled worries about a recession. Euro-zone borrowing costs fell, reversing an earlier rise to multiyear highs.

Heightening jitters about rising interest rates hitting economic growth, the European Central Bank may need to hike rates by another 75 basis points at its October meeting, policymakers said on Wednesday.

Geopolitical tensions intensified as Europe investigated what Germany, Denmark and Sweden said were attacks on two Nord Stream pipelines at the centre of an energy standoff.

Shares of fish farmers such as Mowi, Leroy Seafood and SalMar dropped between 18 per cent and 30 per cent after the Norwegian government proposed a resource tax on salmon and trout farming.

US

Wall Street stock indexes jumped more than 1 per cent as easing Treasury yields lifted rate-sensitive growth stocks, while losses in Apple, after it dropped plans to boost iPhone production, hurt the technology sector.

Shares in Apple, the world’s most valuable public company, lost 2.8 per cent after Bloomberg reported that it had told suppliers to curtail efforts to increase assembly of its iPhone 14 products by as many as six million units in the second half of this year.

Biogen shares surged 37.47 per cent after its Alzheimer’s drug, developed with Japanese partner Eisai, succeeded in slowing cognitive decline.

Eli Lilly & Co, which is also developing an Alzheimer’s drug, rose 8.17 per cent and was among the biggest boosts to the S&P 500 index. — Additional reporting: Reuters