European shares tread water as banks come under pressure

Irish travel website Hostelworld’s shares trade down 30% after poor trading update

European shares steadied on Thursday, with banks coming under pressure after a surprise rights issue by Spain's Banco Popular raised fears that others may follow to strengthen their balance sheets.

The pan-European STOXX Europe 600 ended up 0.1 per cent, while the FTSEurofirst 300 added 0.2 per cent.

Both hit a four-week high in the previous session, helped by a two-day rally in banking stocks.

Europe’s banking sector index gave up part of those gains, falling 0.5 per cent after Banco Popular announced a €2.5 billion cash call. Its shares fell more than 26 per cent.

DUBLIN

The Iseq was marginally down at 6,454 in line with other European bourses. Irish travel website

Hostelworld

was the big story of the day, with its shares falling nearly 30 per cent in London following a negative trading update.

In Dublin, the response was more muted, with shares down only 1 per cent at €3.03 from only 95,000 shares traded. More than four million exchanged hands in London.

Permanent TSB, which has shed value in recent weeks on foot of speculation about mortgage rate changes, bucked the wider European trend to finish marginally up at €2.14.

Swiss-Irish food group Aryzta also traded up 2 per cent at €36.68 , which was roughly in line with industry rivals.

After a positive session on Thursday, Ryanair fell 0.6 per cent to €13.96, while fellow Iseq heavyweight Smurfit Kappa closed down 0.4 per cent at €24.66.

Fruit distributor Total Produce gave up some of its gains from Thursday, dropping 1.4 per cent to €1.67

LONDON

London’s top-flight index struggled to remain in positive territory as banking stocks fell out of favour after

Banco Popular

’s surprise issue.

The FTSE 100 index was 2.8 points higher at 6265.7 despite the slump from the banks, with Royal Bank of Scotland falling 7.4p to 248.6p, Lloyds Banking Group slipping 0.9p to 72.8p and Standard Chartered 5.4p lower at 549.2p.

Department store chain Debenhams was marginally up in the FTSE 250, ahead 0.05p to 73.7p after naming Amazon Fashion boss Sergio Bucher as its new chief executive. Mr Bucher will join in October from Amazon, where he has acted as vice-president of its fashion arm in Europe since 2013.

Still in the retail sector, rival Marks & Spencer remained in the red following Wednesday's 10 per cent slump after it said profits would be hit from efforts to overhaul its clothing business. Shares were down another 8.8p to 390.6p after it suffered broker downgrades, including a cut to underperform from Jefferies.

EUROPE

Speculation about potential capital hikes weighed particularly on Spanish and Italian banks, with

Caixabank

,

Sabadell

,

UBI

and

UniCredit

all down by more than 3.8 per cent.

Guardian Stockbrokers director of trading Atif Latif said the Banco Popular rights issue suggested euro zone banks were still a major concern.

Elsewhere, ArcelorMittal, the world's largest producer of steel, was the biggest gainer in Europe's mining sector and the broader STOXX Europe 600 index with a rise of 6.9 per cent.

Goldman Sachs raised its target price on the stock, and maintained its “conviction list buy” recommendation.

NEW YORK

Wall Street was slightly lower on Thursday as material stocks fell and after oil struggled to stay above the psychologically important $50-per-barrel mark.

Early on the Dow Jones industrial average was down 32.39 points, or 0.18 per cent, at 17,819.12, the S&P 500 index was down 1.35 points, or 0.06 per cent, at 2,089.19 and the Nasdaq composite index was down 0.34 points, or 0.01 per cent, at 4,894.55.

Seven of the 10 major S&P sectors were lower, with the materials index's 0.93 per cent fall leading the decliners. – Reuters/Bloomberg/PA

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times

READ MORE