European shares fall prior to US Fed policy decision
Irish eyes not smiling as Iseq falls 0.4% on anaemic St Patrick’s Day trading
BT Group jumped 6.5 per cent, topping the FTSE 100 after its mobile and internet service provider EE won a new 5G spectrum in an auction. Photograph: Chris J Ratcliffe/AFP via Getty Images
European stocks dropped on Wednesday, with most investors on the sidelines ahead of the US Federal Reserve’s policy decision.
Later, however, the S&P 500 and Dow Jones Industrial Average closed at record highs after the Fed predicted a fast economic recovery from the coronavirus pandemic and said it would maintain its interest rate at close to zero. It was the first time the Dow closed above 33,000 points.
In its statement following its two-day policy meeting, the Federal Reserve projected a rapid jump in US economic growth and inflation this year as the Covid-19 crisis winds down, and repeated its pledge to keep its target interest rate near zero for years to come.
The Iseq fell 0.4 per cent on anaemic St Patrick’s Day trade.
Hostelworld reported revenues down 81 per cent to just €15.4 million, and a loss of almost €49 million, as the travel industry continues to be battered by the coronavirus pandemic.
The stock still rose by 6.8 per cent to €1.10, however, as analysts had expected even worse results and markets were also reassured by the company’s preparations for reopening.
Dalata, the largest hotel group in the country, declined 1.7 per cent to close at €4.32 per share.
Ormonde Mining fell 21 per cent to just under 2 cent per share as most resource stocks struggled.
The blue-chip FTSE 100 index was down 0.6 per cent after posting a more than two-month closing high the previous day, with mining stocks weighing the most. The domestically focused mid-cap FTSE 250 index fell 1.0 per cent from a near 13-month peak, dragged down by consumer discretionary and real estate stocks.
BT Group jumped 6.5 per cent, topping the FTSE 100 after its mobile and internet service provider EE won a new 5G spectrum in an auction.
Retail investment platform Hargreaves Lansdown rose 1.5 per cent, after it forecast profit for the year ending June 30th to be “modestly” above analyst estimates.
Upper Crust owner SSP shed 7.9 per cent, after it warned that revenue from its train and bus station businesses would not recover to pre-pandemic levels before 2024. Shares in Just Eat Takeaway fell as well, down 2.7 per cent on the day it revealed chief executive Jitse Groen was handed a nearly 58 per cent rise in his annual pay packet.
Two outsourcers performed better. Firstly, Serco was up 1.5 per cent after winning a deal to run services for a Canadian military base worth up to £870 million (€1 billion ) over the next two decades. Secondly, Capita rose 1.7 per cent after revealing a cut in pre-tax losses from £62.6 million in 2019 to £49.4 million in 2020.
The pan-European STOXX 600 index fell 0.5 per cent, trading below a one-year peak, with the utilities and basic resources sectors leading declines.
BMW rose 6.2 per cent after it forecast a significant annual increase in pre-tax profit in 2021 with strong performance in all segments. Europe’s automobiles & parts index gained 3.3 per cent to hit a 2018 high, with Volkswagen jumping 11.0 per cent after it forecast 2021 deliveries, sales and earnings to exceed the previous year’s level.
German airport operator Fraport added 0.6 per cent after HSBC upgraded the stock to “buy”, saying the pandemic has forced the company to become “better”.
Austrian hydropower producer Verbund slid 7.9 per cent as it expects 2021 profit to fall after a 14 per cent rise in 2020, thanks to lower electricity prices.
The turnaround nudged the S&P 500 and Dow Jones Industrial Average to all-time highs and pulled the tech-heavy Nasdaq out of the red. The S&P 500 rose 11.41 points, or 0.3 per cent, to 3,974.12, recovering from a 0.7 per cent slide. The benchmark index has now notched an all-time high 14 times this year.
The Dow gained 189.42 points, or 0.6 per cent, to 33,015.37. The Nasdaq, which had been down 1.5 per cent, rose 53.64 points, or 0.4 per cent, to 13,525.20.The benchmark 10-year yield ticked up to a new 13-month high of 1.676 per cent, denting demand for some high-growth technology stocks and pressuring the Nasdaq by about 1 per cent. Fears that the US government’s $1.9 trillion stimulus would overheat the economy have triggered a rapid spike in long-duration Treasury yields, derailing Wall Street’s main indexes from their peaks last month.
Amazon.com Inc rose 1.4 per cent and Tesla Inc added 3.7 per cent, with the two companies giving the greatest lift to the S&P 500. Six out of 11 S&P 500 sector indexes rose, with industrials and consumer discretionary the strongest performers and both up more than 1 per cent.
Fast-food retailer McDonald’s Corp gained 1.9 per cent after Deutsche Bank raised its target price on the stock and also upgraded its recommendation to “buy” from “hold.”
– Additional reporting: Reuters/PA