Markets fret at sovereign debt burden

EUROPEAN STOCK markets sold off yesterday as a series of downbeat statements by companies and weak US economic data dampened expectations of an earnings recovery, while fears about the sovereign debt burden across Europe added to the gloom.

Markets fretted about the higher yields demanded in a Spanish sovereign debt auction and about rumours – later denied – of a credit rating downgrade for France, where presidential elections pose an additional risk.

DUBLIN

On the Iseq, activity centred on the corporate upheaval at Independent News Media, which closed up 6.6 per cent, or a gain of 2 cent, at 24 cent.

Confirmation of the departure of Gavin O’Reilly as IN&M chief executive at an afternoon board meeting came after the close of trading, but speculation about his imminent exit had been building all day. A total of 13 million IN&M shares, or a 2 per cent stake, changed hands in two tranches in early trading. The company’s biggest shareholder, Denis O’Brien, retains a 22 per cent stake, while Sir Anthony O’Reilly holds a 13 per cent stake.

Elsewhere, titanium miner Kenmare had a strong day, pushed better on speculation that prices for titanium-dioxide would rise. The stock closed up 4.8 per cent at 66 cent.

Building materials group CRH fell 2.4 per cent to €14.85 as sellers circled the stock, while paper and packaging group Smurfit Kappa also had a weak day, declining 2.9 per cent at €6.68.

Overall the Iseq finished down almost half a per cent.

LONDON

Stocks in the UK were little changed as a rally in Hargreaves Lansdown and Rolls-Royce Holdings offset worse-than-expected US economic reports.

The FTSE 100 Index lost less than 0.1 per cent to 5,744.55. The benchmark gauge has still lost 3.7 per cent from its 2012 high on March 16th amid mounting concern that euro zone policy-makers have yet to contain the sovereign debt crisis.

Rolls-Royce Holdings rose 3.8 per cent to 844p, its highest price since at least September 1988. Saab, a Swedish maker of equipment for the defence industry, reported first-quarter earnings that beat estimates. Morgan Stanley yesterday reiterated its outperform or buy recommendation on Rolls-Royce before the world’s second largest aircraft-engine maker reports results on May 4th.

Hargreaves, Britain’s largest retail broker, jumped 5.6 per cent after posting an 11 per cent increase in assets under management.

GlaxoSmithKline rose 0.9 per cent to 1,454p. The drugmaker offered about $2.59 billion to buy Human Genome Sciences, its US partner on the lupus treatment Benlysta. Human Genome rejected the bid.

Cable and Wireless Worldwide tumbled 8.2 per cent to 34p. Tata Communications said yesterday it failed to agree on a price so it would not bid for the UK network operator.

Man Group, the world’s largest publicly traded hedge fund manager, dropped 6.2 per cent to 93.4p, the lowest since November 2000. The stock fell 7.4 per cent yesterday as assets at the firm’s flagship AHL Diversified fund slipped last week.

EUROPE

France’s CAC-40 closed down 2.1 per cent and Spain’s IBEX lost 2.4 per cent. Implied volatility on Eurostoxx 50, a crude gauge of risk aversion, rose 2 per cent, and yields on safe haven German bunds hit record lows on relief following a successful Spanish auction. Spain and France raised €10.54 billion in debt in the morning auctions, meeting their maximum plans.

The FTSEurofirst 300 fell 0.5 per cent to 1,040.79, with weakness in the euro zone partly offset by gains of 0.5 per cent on Sweden’s bourse and 0.7 per cent in Denmark, as well as the flat performance of the FTSE 100.

US

In New York stocks fell for a second day as data on manufacturing, home sales and jobless claims tempered optimism in the economy, overshadowing improving earnings.

The Standard & Poor’s 500 index slipped 0.5 per cent to 1,377.73 at lunchtime in New York after rising as much as 0.4 per cent. The Stoxx Europe 600 index fell 0.5 per cent, erasing an earlier 1 per cent rally.

Morgan Stanley and Bank of America reported that earnings were boosted by higher trading revenue, while eBay surged as its PayPal payments service fuelled profit growth.

A US Labor Department report showed jobless claims fell to 386,000 in the week ended April 14th from a revised 388,000 the prior period.

A separate report show sales of previously owned houses unexpectedly fell in March.

Purchases dropped 2.6 per cent to a 4.48 million annual rate from 4.6 million in February, missing the average forecast of an increase to 4.61 million.

(Additional reporting: Bloomberg/Reuters.)