European shares recover but Catalonia casts a shadow
Building materials group CRH and Ryanair were the main movers on the Iseq Index
US stocks traded in a narrow range, with losses in industrial shares led by General Electric offsetting gains elsewhere. Photograph: Spencer Platt/Getty Images
European shares edged higher on Monday, but underlying concerns surrounding the political crisis in Catalonia and the potential for contagion continues to overhang markets.
Shares in building materials group CRH finished the day up 1.5 per cent on Monday following its successful acquisition of US cement maker Ash Grove on Friday.
CRH and Ryanair were the main movers on what was a quiet day on the Iseq index, which finished the day up 0.5 per cent. Ryanair finished down 1.5 per cent after the European Employee Representative Council in the UK demanded a wage increase turned down by London Stansted crews be doubled and extended across the airline’s European bases.
“It’s a fair jump from the conditions they are currently on, so that dragged its stock down,” said an analyst with Davy.
CRH was up 1.5 per cent on the day. “CRH closed the deal for US cement maker Ash Grove on Friday night, so it has obtained a very good asset and the market reacted to that,” noted the analyst.
Bank of Ireland traded up 0.5 per cent, despite the tracker mortgage scandal. “It had a very low close on Friday with the issue around mortgage redress overhanging the stock and holding it back a bit,” said the analyst.
Declines among British banks and Mediclinic shares kept gains in check on the UK’s main share index, though engineering group GKN was a bright spot.
The FTSE 100 closed flat at 7,524.45 points, while the FTSE 250 index of mid-range stocks, which hit a record high last week, retreated 0.1 per cent.
Profit warnings in the UK market have multiplied in recent weeks, and the latest to cut expectations were car dealership Pendragon and lighting products maker Dialight, sending their shares down 15 to 18 per cent.
Pierre Bose, head of European equity strategy at Credit Suisse, said more profit warnings from UK companies were to be expected if the economy’s growth continued to deteriorate.
“We need results on the Brexit talks because from a corporate perspective, for investment spending, you need better clarity,” he added.
European shares edged higher on Monday, though banks weighed and Madrid’s bourse lagged peers as Catalonia’s political crisis deepened.
The pan-European STOXX 600 index ended the session 0.2 per cent higher, while Spain’s benchmark Ibex fell 0.6 per cent with banks, including BBVA and Banco Santander, both down more than 1 per cent, taking the most points off the index.
“At this moment, you don’t have contagion from Spain to the broader European market. It’s seen as a national and localised issue,” said Mr Bose.
Financial shares fell across Europe, with the banking sector down 0.5 per cent and heavyweights Deutsche Bank and Standard Chartered losing 1.2 per cent and 0.6 per cent respectively.
Company results were also in focus, with Securitas among the top STOXX performers, up 3.6 per cent after reporting third-quarter earnings.
US stocks traded in a narrow range, with losses in industrial shares led by GE offsetting gains in healthcare and technology sectors.
General Electric was on track to post its worst single-day loss in more than six years, after a bunch of brokerages cut their price targets on the stock, citing higher chances of a dividend cut at the industrial conglomerate.
Still, the indices were near their all-time highs on a steady stream of upbeat third-quarter earnings and hopes that president Donald Trump’s tax plans may move forward after the Senate’s approval of a budget resolution on Friday.
Nearly three-quarters of the 97 S&P 500 companies that have reported earnings so far have beaten expectations.
“Earnings is the dominant theme of the market, with talks of tax reforms swirling around on the outside,” said Michael Antonelli, managing director of institutional sales trading at Robert W Baird in Milwaukee.
– (Additional reporting: agencies)