European markets dip over concerns about US economy

Dublin’s Iseq falls as CRH, Irish Continental and Fyffes decline

Dublin market: Ryanair closed fractionally positive at €12.75. Photograph: Chris Radburn/PA Wire

Dublin market: Ryanair closed fractionally positive at €12.75. Photograph: Chris Radburn/PA Wire

 

European stocks slid for the first time in four days after a worse-than-forecast report on US services raised concern about the strength of the world’s biggest economy.

The Stoxx Europe 600 index lost 0.3 per cent at the close, erasing a rise of as much as 0.3 per cent, after data from the Institute for Supply Management showed US services industries expanded in August at the weakest pace in six years.

Investors are also awaiting Thursday’s meeting of the European Central Bank, with most economists predicting ECB president Mario Draghi will lengthen quantitative easing for a second time, while leaving interest rates unchanged.

Dublin

The Iseq fell 0.8 per cent, as its biggest stock, CRH, slipped back. The building materials company dropped 1.3 per cent to €30.50, while there were falls also for Irish Continental, which declined 2 per cent to €4.80, and fruit distributor Fyffes, which closed down 0.6 per cent at €1.60.

Dalata Hotel Group published first-half results that came in slightly ahead of expectations, but its performance in the UK market, which accounts for a quarter of group revenue, disappointed. Its stock closed down 3.5 per cent at €4.15, which added to a 2 per cent decline during Monday’s session.

Ryanair closed fractionally positive at €12.75, while paper and packaging group Smurfit Kappa closed marginally negative at €23.33. The Green Real Estate Investment Trust (Reit), which publishes financial results next week, finished down 1.2 per cent at €1.45.

London

The FTSE 100 index lost ground on Tuesday, as a drop in Asian-focused bank Standard Chartered and Provident Financial weighed on the market. The blue-chip index closed down 0.8 per cent, with banks making up four of the top five fallers. The growth-sensitive sector ended down 2.2 per cent, extending falls after data that showed the US services index fell by the most since the financial crisis in August.

Standard Chartered fell 3 per cent, the worst-performing stock on the FTSE 100, after Barclays cut its rating on to “underweight” from “equal weight”. Rival Asian-focused bank HSBC dipped 2.3 per cent, while a price target cut from RBC Capital Markets on Provident Financial pushed down its shares.

Traders said a rise in sterling also put pressure on the FTSE 100, whose internationally-focused and export-driven companies typically benefit when the pound weakens and which lagged other European markets. Sterling hit a seven-week high against the dollar after the weak US data, and also benefited from strong supply from a Bank of England bond buyback.

Housebuilder Berkeley Group, which is dropping out of the FTSE 100 after slumping on concerns about slowing demand following Britain’s vote to leave the European Union, rallied 3.5 per cent. Berkeley said its market had stabilised after a jump in post-Brexit vote cancellations.

Clothes retailer Sports Direct rose 5.2 per cent after it said it would overhaul its employment practices and would offer directly employed shop workers the option of switching from zero-hour contracts to ones with a guaranteed minimum amount of work.

Europe

Europe’s benchmark Stoxx Europe 600 index lost ground after three days of moving higher, as investors’ recovery hopes dimmed, and the US data focused their intention on downside risks.

Germany’s Dax index rose as much as 0.7 per cent, almost erasing its annual drop, before paring gains following the US data.

German health care group Fresenius climbed 6.4 per cent after the healthcare provider said it will pay $6.42 billion for Spain’s largest private hospital company.

Banks fell the most among Stoxx 600 groups, while energy producers reversed an earlier advance to become the second-biggest losers.

France-based Ingenico Group slumped 14 per cent after the electronic payments processor lowered its annual profit margin and revenue growth forecasts.

Dutch fertiliser group OCI slid 6.9 per cent after it reported a decline in first-half revenue.

US

Wall Street reopened after Monday’s Labor Day holiday, with stocks wobbling in early trading after the weakest monthly expansion in services industries since February 2010. That sent bond yields lower, dragging down banks, while energy and healthcare companies were lifted by mergers.

Spectra Energy rallied 13 per cent after agreeing to a $28 billion stock-for-stock transaction with Enbridge.

Cepheid jumped 52 per cent after Danaher agreed to buy the company in a deal valued at about $4 billion, including debt.

The S&P 500’s financial index dropped 0.64 per cent, its biggest decline in nearly one month, dragged down by banks including Wells Fargo, Bank of America and JPMorgan.

Federal Reserve chair Janet Yellen said last month that the case for higher interest rates had strengthened. However, the recent spate of weak data has lengthened the odds of an imminent increase.

(Additional reporting: Bloomberg / Reuters)