Bump in commodity prices and solid earnings lift stocks
Ryanair drives Irish index higher despite issuing profit warning on sterling slide
The New York Stock Exchange earlier on Tuesday: the S&P and the Nasdaq were on track for their best day this month. Photographer: Michael Nagle/Bloomberg
Rising commodity prices pulled shares higher and the dollar slipped from a seven-month peak on Tuesday, while sterling jumped on suggestions the UK parliament would have to ratify any deal for Britain to leave the EU.
The pan-European STOXX 600 share index rose 1.4 per cent, led higher by a 2.9 per cent rise in the basic resources sub-index and a 2.2 per cent gain in banks. Britain’s internationally-focused FTSE 100 index, in which miners are heavily represented, rose 1.2 per cent.
The Iseq index of shares closed the day 111 points up at 6,006 in line with positive developments elsewhere. The main mover on the Dublin market was Ryanair, which rose 5 per cent up at €12.41 despite issuing a profit warning on the back of the current slide in sterling.
One trader said the airline’s cut to its full-year profit guidance had already been accounted for by investors, who were buoyed by more positive noises about its projected passenger numbers.
Bank of Ireland rose 3 per cent 17.7 cent in line with other European financials. The stock has underperformed its peers in recent weeks thanks to a large seller.
Building materials group CRH rose 2.3 per cent to €30.44 while Smurfit Kappa was up 3.5 per cent to €20.39 on foot of positive box shipment data from the US.
Glanbia was one of the few shares to slide in value, dropping 1.5 per cent to €15.34.
British stocks climbed on Tuesday, rebounding from a fall the previous day as a rise for easyJet and mining companies helped outweigh a sharp drop in Burberry’s shares. The blue chip FTSE 100 index was up 0.8 per cent at 7,000.06 points by the close, underperforming a rally in other European indexes as sterling rose.
Among the biggest gainers was easyJet, up 5.1 per cent. The stock has fallen about 40 per cent since Britain voted to leave the European Union, and it issued a profit warning earlier this month. Investors said that there was value in easyJet after Ryanair followed suit on Tuesday in cutting its profit forecasts.
Supportive forex conditions for Burberry could not help the luxury firm much. It slumped 7.2 per cent and was on track for its biggest daily fall in more than four years after reporting results, with analysts at Liberum citing weakness in its wholesale figures despite a surge in sales in its home market as tourists took advantage of a lower pound.
Burberry was also joined by education publisher Pearson , which fell 2.3 percent after several brokers cut their price targets on the stock. Pearson slumped in the previous session after reporting an underwhelming set of figures, and Tuesday’s fall took its losses to more than 11 per cent for this week.
Banca Popolare dell’Emilia Romagna and Banco Popolare rose at least 2.5 per cent, sending Italy’s FTSE MIB Index to the biggest advance among western-European markets.
Bonds around the world have slumped this month on speculation higher oil prices will prompt an acceleration in inflation globally. Traders are pricing in a 66 per cent chance the Fed will raise rates in December, and about even odds of another increase in 2017.
Investors are also assessing earnings releases. Among stocks active on results on Tuesday, Remy Cointreau added 3 per cent after its sales growth beat estimates.
Bureau Veritas slipped 4.4 per cent after lowering its annual outlook. Kuehne and Nagel International dropped 3.1 per cent after its profit missed estimates.
The S&P and the Nasdaq were on track for their best day this month on Tuesday as a slew of market-beating results from marquee companies boosted optimism about Corporate America’s health. The spotlight was on the healthcare sector, which rose 1.04 per cent, the most in more than one month, after UnitedHealth’s upbeat forecast.
UnitedHealth rose 6.3 per cent and boosted its fellow health insurers. Netflix, which dragged on the market on Monday ahead of its results, was the biggest gainer on the S&P 500 on Tuesday, rising nearly 19 per cent after posting much higher-than-expected subscriber growth.
Goldman Sachs rose 2.2 per cent, lifting shares of other banks, after the company’s results blew past Wall Street estimates, mirroring results at its Wall Street peers. Of the 37 S&P 500 companies that have reported results until Monday, 78 per cent have reported earnings that have topped analysts average estimate, according to Thomson Reuters.
Additional reporting by Reuters/Bloomberg