Italian bond auction fails to lift spirits

THE IRISH market was still in its post-Christmas slumber, rising just 0.5 per cent and lagging gains of 1 per cent or higher across other European markets.

The Italian bond auction, the country’s last of the year and the first major European debt sale since banks tapped the European Central Bank for emergency three-year liquidity earlier this month, failed to lift festive spirits early in trading on the markets.

Later in the day new figures for American unemployment claims in line with expectations and showing signs of some recovery in the US labour market led to more positive trading activity.

Still, one Dublin-based stockbroker reported that trading activity across all markets was about half the level recorded in the weeks running up to Christmas.

DUBLIN

Among the more traded stocks on the Irish bourse on this very quiet day were food group Greencore, which rose 2.5 per cent or just under two cent, to 62 cent, and Ryanair, which fell 1.9 per cent or 7 cent to €3.67 a share.

Building materials giant CRH rose 1.3 per cent to end the day at €14.83, while Kingspan lost 2.9 per cent to finish at €6.16 a share.

Financial firm IFG dropped 2.4 per cent or 2 cents to 99 cents.

EURO

The euro wiped out earlier losses against the dollar, rebounding from a 15-month low and, for the second straight day, a decade low against the yen, in thin trading on the currency.

The early decline was driven by the less-than-reassuring Italian bond sale when the debt-laden country raised a figure below its maximum target of €8.5 billion at the auction at a rate below the unsustainable 7 per cent level.

Concerns about Italy’s funding needs weighed on markets despite Italy raising the cash at a level that was below its euro-era record at previous bond sales but still uncomfortably high for a country that needs to raise €450 billion on further debt sales in 2012.

The euro ended the trading session little changed at $1.2941, after slumping as much as 0.6 per cent to $1.2856 against the dollar. The currency clawed back a 0.8 per cent decline against the yen to 0.3 per cent by the end of the day.

The euro rose against sterling to 84p amid fears over the potential effect the ongoing euro zone crisis could have on London.

INTERNATIONAL MARKETS

The UK market staged a last minute rally after the US said weekly unemployment claims over a four-week average fell for the fourth week in a row to their lowest level since July 2008.

The FTSE 100 Index closed 59 points or 1 per cent higher with the banks among the risers including Royal Bank of Scotland up 0.3p at 20.1p and Lloyds Banking Group 0.5p stronger at 25.5p.

Retailer Next was up 49p at 2737p ahead of a trading update next week, but the rally seen yesterday for Marks Spencer proved short-lived as its shares fell 0.9p to 309.5p. Irish company CRH closed up 1.5 per cent or 19p at 1,244p on the FTSE. BQ owner Kingfisher edged 2.8p higher to 248.8p, while Superdry owner SuperGroup saw its shares lift 8.1p to 494.8p.

Elsewhere in the FTSE 250 Index, shares in betting exchange Betfair were 3 per cent lower after a technical glitch reportedly forced it to void all bets on a race at Leopardstown. The stock fell for a second successive day of trading, down 21.5p at 760p.

European stocks advanced for the fourth time in five days on the back of the positive US jobs news. National benchmark indexes advanced in 16 of the 18 Western European markets. Frankfurt’s DAX rose 1.3 per cent, while the CAC 40 in Paris rose 1.8 per cent.

US stocks rose buoyed by data showing pending sales of existing US homes surged to an 18-month high in November. Despite gains during the day, the Standard and Poor’s 500 Index remained virtually flat for the year. The Dow Jones industrial average was up 1.12 per cent, at 12,287.04, while the SP climbed 1.07 per cent, to 1,263.02. The Nasdaq Composite Index rose 0.92 per cent to 2,613.74.

GOLD AND OIL

Gold prices fell to a near six-month low as investors, facing very tight capital markets, sold the safe-haven metal to meet their obligations. Gold futures fell as much as 2.6 per cent to $1,523 an ounce, the lowest price since July. US crude oil prices fell about $1 a barrel as a strengthening dollar made the commodity more expensive for non-US investors.

BOND MARKETS

Italy sold 10-year bonds at a yield of 6.98 per cent, compared with 7.56 per cent at the end of November, and below the 7 per cent level which forced Greece, Ireland and Portugal into seeking outside help with bailout loans.

However, analysts pointed out that the interest rate differential between Italian and German 10-year debt was higher as investors sought safer German securities. – (Additional reporting Bloomberg, Reuters)