European shares drift lower ahead of Fed decision

Global stocks tread water even after tension-raising speech by US president

European stocks drifted lower ahead of the US Federal Reserve’s rate decision and press conference, which took place after the main EU bourses closed.

The pan-European FTSEurofirst 300 index lost 0.18 per cent. However, financial markets remained largely calm yesterday after US president Donald Trump used a UN speech to threaten to annihilate North Korea.

Markets are pricing in a 56 per cent probability of the Fed raising rates in December, according to the CME Group's FedWatch tool. The European Central Bank is widely expected to say next month that it will begin scaling back its asset-purchase stimulus programme from January, even though a stronger euro, which dampens inflation, has complicated the outlook.

"If we move closer to a US rate hike, that should come along with a bit more dollar strength and euro weakness which would harden the ECB's exit case and be a headwind for government bonds," said Commerzbank strategist Rainer Guntermann.



The Iseq was down slightly on the previous session, closing the day 17 points 6,665. The main mover was Permanent TSB, which rose nearly 6 per cent to €1.80 on good trading volumes. Traders were, however, at a loss to explain the jump other than to note that Davy co-ordinated a financial site visit for PTSB investors.

Ryanair, which has been in the eye of a storm over the flight cancellation controversy, was down a further 2 per cent €16.59, underperforming its peers in the sector.

Iseq heavyweight CRH was down fractionally at €29.96 while packaging firm Smurfit Kappa was also down marginally at €27.10

Hotel group Dalata was up 2.2 per cent at €5.59 following the release of positive hotel occupancy numbers for Dublin and London.


Domino's Pizza Group has announced it is launching a £15 million share buyback programme, in a move that sent the FTSE 250 firm's shares up by more than 6 per cent, or 16.7p to 291.8p. Meanwhile British outsourcing company Mitie Group said it may cut up to 480 jobs as it overhauls its cleaning and engineering divisions, and said the cost of its turnaround would be higher than expected. Mitie shares fell 4.6 per cent to a three-month low of 246 pence in early trade on Wednesday, before recovering some of these losses later in the day.

Diageo, the maker of Johnnie Walker whisky and Smirnoff vodka, forecast stronger sales and profit growth in the second half of its financial year after a first half affected by negative factors in China and India and higher spending. Diageo gave the warning in a trading update ahead of its annual general meeting in London on Wednesday, sending its shares down 2 per cent and making them the weakest performer on the FTSE 100 Index.


Germany's Thyssenkrupp and India's Tata Steel agreed on Wednesday to merge their European steel operations to create the continent's number two steelmaker. The deal, which is preliminary, will help the companies address overcapacity in Europe's steel market, which faces cheap imports from overseas, subdued construction demand and inefficient legacy plants. Thyssenkrupp shares rose 3.2 per cent, bolstered by hopes the joint venture will also ease the burden on its balance sheet, which will be freed from €4 billion in mostly pension liabilities.

Finnish utility Fortum, meanwhile, plans to offer €8.05 billion for Eon's legacy fossil fuel and trading business, Uniper, as consolidation in the European power sector accelerates. Shares in Uniper jumped 5.8 per cent to €22.27 in Frankfurt, above the bid price while Fortum rose 4.1 per cent to €16.88, while Eon gained 3.1 per cent to €9.49 .

New York

General Mills reported a smaller-than-expected quarterly profit as yogurt and cereal sales declined in North America, sending the company's shares down 9 per cent to their lowest levels in nearly two years. The results underscore General Mills' struggles with consumers' shifting preference for protein-rich and thicker Greek yogurts.

Pfizer rose more than 2 per cent, lifting the S&P and the Dow higher, after Morgan Stanley upgraded stock to "overweight" from "equal weight". Adobe fell 4.5 per cent after the Photoshop maker's revenue forecast came in line with estimates. Bed Bath & Beyond sank more than 16 per cent after the home furnishing retailer reported earnings and sales below estimates, prompting a slew of price target cuts.

– Additional reporting by Reuters/Bloomberg

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times