Doubts on US stimulus depress stocks

STOCK MARKETS declined and the euro dropped in value as expectations fell that the US Federal Reserve chairman Ben Bernanke would signal a new round of economic stimulus measures in a key address to central bankers today.

A successful bond sale by Italy reflected the growing confidence among investors that the European Central Bank will take more aggressive action to tackle the euro crisis, but investor doubts about Mr Bernanke’s much-anticipated speech to the symposium of central bankers in Jackson Hole, Wyoming, dragged down shares.

Hopes for further easing had grown since a Fed meeting showed policymakers could act “fairly soon”.

US shares slid and European stocks hit a four-week low as investors closed out share positions before Mr Bernanke’s speech, which is expected to provide clues to the Fed’s next move.

DUBLIN

THE ISEQ fell 0.4 per cent on weak trading volumes as investors in Irish shares await stronger measures by the ECB to ease the crisis in the euro zone.

CRH, the building materials group and the largest stock on the market, fell 2 per cent, dropping below the €14 mark, dragging the index down, given that it makes up about a third of the bourse’s value.

Irish Continental Group rose 9.4 per cent, or €1.50, to €17.50 a share, the highest in over three years, after the ferry company reported reduced profits but told investors it would buy back up to 24 per cent of the company’s shareholding – as much as 111.5 million shares – at a price of €18.50 a share with shareholders’ approval.

FBD rose 4.1 per cent, or 35 cents a share, to €8.80, as investors continued to absorb the expectation-beating profits in the insurer’s half-year results posted on Wednesday.

Bookmaker Paddy Power rose 1.7 per cent, or 92 cents, to €54.07, as the market took greater comfort from the half-year results on Wednesday, which were below what investors were expecting.

One trader said profits were lower due to marketing spend and investment in new businesses, which gave investors heart yesterday in the firm’s prospects on the back of this higher spend.

Building materials and DIY group Grafton was the biggest loser on the day, dropping 3.5 per cent, or 11 cents, to €3.04 a share.

LONDON

UK STOCKS fell for a third day as data from Japan and Korea added to evidence that global growth is slowing, amid concerns about the the effect of Mr Bernanke’s speech.

“Investors started to realise Bernanke probably won’t give more details of a new round of stimulus tomorrow, particularly after the positive GDP number earlier in the week,” said Edmund Shing, an analyst at Barclays in London.

“It’s not that central bank action won’t happen, it just won’t happen right now, and that leaves markets with uncertainty, which they don’t like.”

The FTSE 100 Index retreated 0.4 per cent to four-week low.

Retail sales in Japan fell 0.9 per cent in July from a year earlier, more than economists had anticipated, while confidence among manufacturers in South Korea remained near the lowest level since the global financial crisis.

Xstrata and Glencore International fell more than 2 per cent after Qatar, the second-largest investor in Xstrata, said it would vote against a $31 billion merger.

Rio Tinto slid 2.1 per cent as iron ore prices fell to a three-year low in China. Hays shed 8.8 per cent after saying several markets would stay very challenging, while WPP lost 1.6 per cent after the world’s largest advertising company cut its sales-growth forecast.

JJB Sports, the Lancashire-based sporting goods retailer, plunged 84 per cent to its lowest price since at least 1994, after the company was put up for sale, saying it would not be able to raise the funds needed for a turnaround.

EUROPE

STOCKS FELL for a third day as data from Germany pointed to a global growth slowdown. France’s CAC 40 lost 1 per cent, while Germany’s DAX fell 1.6 per cent.

Daimler and Fiat led a sell-off in carmakers as Morgan Stanley said earnings in Europe were at risk. Carrefour and Vivendi climbed, after earnings topped analyst estimates.

The Stoxx Europe 600 Index fell 0.8 per cent, extending the week’s decline to 1.1 per cent. The index has still surged 13 per cent from its June 4th low, amid speculation that central banks will do more to bolster growth.

German unemployment rose for a fifth straight month in August, while economic confidence in the euro zone fell more than economists forecast to a three-year low.

NEW YORK

THE FED said late yesterday in its Beige Book business survey that the economy continued to expand “gradually,” damping speculation Bernanke will announce a third round of bond purchases.

US stocks retreated, trimming the third straight monthly advance for the benchmark Standard and Poor’s 500 Index, amid concern about a worsening of Europe’s debt crisis and of a further slowdown of the global economy. – (Additional reporting Wires)