Investors cautious ahead of Fed move

IT WAS a mixed day on stock markets yesterday, with most euro zone markets closing down, though the FTSE reached a three-week high in London, and the US market was up on early trading.

After Wednesday’s relief rally following the clearance by Germany’s top constitutional court of ratification of the euro zone’s permanent bailout fund, the mood yesterday was more tentative as markets awaited last night’s Federal Reserve decision on further stimulus measures.

DUBLIN

THE ISEQ index finished the session marginally higher, up 0.2 per cent. Like most markets it was hesitant as it awaited certainty of further quantitative easing.

While volumes were a bit better than of late, they were still relatively low.

There was some volume in Bank of Ireland, analysts noted, with the stock up 1 per cent at €0.098. Ryanair saw quieter than usual trading, around the €4.32 level for the day, finishing slightly up at €4.33.

United Drug saw some activity, though it finished flat at €2.76. The company yesterday confirmed it had received regulatory clearance from the Spanish and Portuguese competition authorities for the acquisition of Pharmexx.

Providence announced that it had secured a rig to drill its Dunquin well in the Porcupine Basin. The stock closed up 1.4 per cent at €8.85. Grafton group slipped 2 per cent to €3.28 after peer group Homebase reported a decline in sales.

LONDON

UK STOCKS climbed to a three-week high ahead of the US Federal Reserve statement on bond-buying. The FTSE 100 Index gained 37.84 points, or 0.7 per cent, to 5,819.92 at the close in London. Rolls-Royce Holdings rose 3.1 per cent for the biggest advance on the FTSE 100 Index amid merger activity in the European defence sector.

BAE Systems, Europes largest defence company, yesterday confirmed it is in merger talks with Frances Airbus owner EADS. The news sent the shares down 7.3 per cent to 337.1 pence, paring some of Wednesdays 11 per cent rally, Barclays recommended selling BAE shares “in the near term”. even as they retained an overweight rating, similar to buy, on the stock.

Next declined 7.2 per cent after the retailer reported “disappointing” sales growth, though the company still reported first-half profit that beat analyst estimates.

Debenhams, Britain’s second-largest department store chain, fell 1.8 per cent to 98.25 pence.

Vodafone, the second-heaviest weighted stock on the FTSE 100, gained 1.9 per cent to 177.35 pence.

EUROPE

EUROPEAN STOCKS fell from the highest level in 14 months as investors awaited a Federal Reserve decision on further stimulus measures.

Zodiac Aerospace rose 2.1 per cent after Société Générale upgraded its rating on the stock.

The Stoxx Europe 600 Index slipped 0.2 per cent to 272.42 at the close of trading, paring losses of as much as 0.6 per cent. The gauge rose to its highest level since July 2011 on Wednesday after Germanys top constitutional court cleared the way for ratification of the euro areas permanent bailout fund.

National benchmark indices fell in 11 of the 18 western European markets. Germanys Dax lost 0.5 per cent, while Frances Cac 40 slid 1.2 per cent.

Imagination Technologies tumbled 7.2 per cent to 566 pence after saying first-quarter royalty revenue growth was in line with expectations, while royalty rates decreased slightly because of higher volumes in low-end smartphones.

Vestas Vinci, Europes biggest builder, fell 3.6 per cent to €35.46 after Bank of America cut its recommendation on the shares to neutral from buy. A gauge of construction companies made the biggest contribution to the Stoxx 600s decline. Vestas Wind Systems, the worlds largest wind turbine maker, plunged 13 per cent to 34.55 kroner. The company is considering selling shares to existing investors if talks on a strategic co-operation with Mitsubishi Heavy Industries.

US

US STOCKS were strong in early trade as the Federal Reserve said it would buy mortgage-backed securities and keep interest rates “exceptionally low” through the middle of 2015 to bolster the economy.

Pall rallied as much as 7.6 per cent as it reported quarterly earnings that topped analysts’ estimates, while Apple added 1.1 per cent after unveiling a new version of the iPhone on Wednesday.

Northrop Grumman slumped 3 per cent after UBS cut the stock to sell, saying the company is “most exposed” to US budget cuts.

Industrial and energy stocks were down. Caterpillar, the worlds largest maker of construction and mining equipment and National Oilwell Varco, the largest US maker of oilfield equipment, were both trading lower yesterday. – (Additional reporting: Bloomberg, Reuters)