European shares close off highs on Italian political woes

Irish banking shares amongst the worst performers as the Iseq drops

European shares, which were buoyed early on Friday by rising hopes of a US interest rate cut, ended the session off their highs as fresh political troubles in Italy amid speculation that its government might collapse drove investors away from financial stocks.

"While it is looking increasingly certain that the Fed will probably cut rates this month it is stretching credibility to suggest that they will cut by 50 basis points," CMC Markets analyst Michael Hewson said. Fifty basis points equates to half a percentage point.

The pan-European Stoxx index closed 0.12 higher at 387.25.


The Iseq index of Irish shares dropped 0.15 per cent to 6,267.36, with banking stocks among the worst performers. Bank of Ireland lost 2.8 per cent to €4.35, while Permanent TSB lost 1.3 per cent to €1.21, and AIB declined 1.1 per cent to €3.46.


Providence Resources dropped 21 per cent – albeit amid very thin trading volumes – as investors waited for news on whether funds due from the company's Chinese partner for its Barryroe oil project off the Cork coast had landed ahead of a final deadline on Friday. The shares lost just 1.2 per cent in London, where they were more actively traded.

Bucking the trend, property groups including housebuilders Glenveagh Properties, Cairn Homes, Irish Residential Properties Reit and Hibernia Reit were in demand as German brokerage started coverage of the sector with buy ratings on each of the companies.


London's FTSE 100 ended 0.2 per cent higher. Acacia Mining soared 19 per cent to £2.226 pence after agreeing to an increased buyout offer from Barrick Gold.

An unexpected rebound in retail sales in June did raise hopes that the sector could tide over risks from a Brexit-driven hit to consumer sentiment. Ocado jumped 4.7 per cent on the main index, while Just Eat and Sainsbury's also rose.

Travel firm TUI added 5.1 per cent on hopes that it would be compensated by Boeing after the US planemaker said it would take a $4.9 billion charge related to estimated disruptions from the grounding of its 737 Max jets. However, WPP slid 2.2 per cent after French rival Publicis cut its annual revenue growth target. Publicis is struggling to revive sluggish sales in the US amid increasing competition for ad dollars from Facebook and Google.


Italian banks counted among the worst performers on the Milan market as deputy prime minister Matteo Salvini said that he would meet coalition partner and leader of the 5-Star Movement Luigi Di Maio amid fears that a stand-off between the two parties might collapse the populist government.

Banco BPM dropped 6 per cent to €1.77, Ubi Banca lost 4.5 per cent to €2.47, and Unicredit declined by 3.7 per cent to €11.23.

Belgo-Dutch biotech company Galapagos climbed 5.7 per cent after KBC Securities raised its price target on the Amsterdam-listed stock. Brewing giant AB InBev shares advanced 5.5 per cent after it announced the sale of its Australian unit to Japan's Asahi.


Wall Street's main indexes inched higher in early afternoon trading after solid results from technology giant Microsoft added to an upbeat mood following hints from a top Federal Reserve official that a US interest rate cut could be imminent.

Microsoft Corp, the most valuable US company, rose 1.7 per cent as strength in its cloud business helped it beat estimates at the end of a week of mixed earnings.

Remarks from the New York Fed president John Williams, a permanent voting member of the Fed's policy setting committee, that the US central bank cannot wait for economic disaster to unfold and must add stimulus early had already driven Wall Street gains on Thursday.

Boeing advanced after the planemaker disclosed it would take a $4.9 billion after-tax hit due to estimated disruptions from the grounding of its 737 Max. The share price move indicated that investors had expected worst.

– Additional reporting, Reuters

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times