Investors dump stocks as Fed delivers sobering outlook

Market report: European bourses tumble with Iseq shedding 4.2%

US Federal Reserve chairman Jerome Powell. The Fed’s outlook cast doubt on hopes for a V-shaped recovery. Photograph: Getty Images

US Federal Reserve chairman Jerome Powell. The Fed’s outlook cast doubt on hopes for a V-shaped recovery. Photograph: Getty Images

 

Investors sought out safe-haven assets on Thursday as a gauge of global equity markets fell the most in seven weeks after the Federal Reserve’s sobering outlook cast doubt on hopes for a V-shaped recovery after the coronavirus pandemic.

The main European bourses tumbled, snuffing a rally that had recouped much of the market’s deep losses.

Dublin

The Iseq All-Share index fell 4.2 per cent on Thursday, in line with European peers.

Yet again, banks were among the biggest losers, prompting one Dublin trader to say that the banking stocks were “trading like technology stocks back in the dot-com day”. AIB fell the most, closing 9.71 per cent lower at €1.023. It was up as high as €1.32 on Monday, indicating the extent of volatility in the market. Bank of Ireland dropped 7.21 per cent to €1.62.

As a sector, airlines again took a hit on the back of comments from the US Federal Reserve chairman Jerome Powell which suggested a rough road to recovery. Ryanair fell by 6.78 per cent to €11.06.

The blue-chip Iseq 20 index was a sea of red on the day, with those considered as gainers to be the stocks that merely outperformed the market. In that category were real-estate investment trusts Hibernia Reit, which fell 1.68 per cent to €1.05, and I-Res Reit, which declined by 1.74 per cent to €1.35.

Bigger names such as insulation maker Kingspan fell 5.9 per cent to €52.00, while paper and packaging giant Smurfit Kappa closed 5 per cent lower at €27.34.

London

The blue-chip FTSE 100 index closed 4 per cent lower. The British mid-cap index fell 3.6 per cent, logging its worst day in nearly two months.

British stocks are now set for their first weekly fall in four, with hopes of a quicker economic revival fizzling out as pre-existing worries of the Covid-19 pandemic hammer risk appetite.

Travel and leisure stocks took another beating on Thursday, with Carnival’s 12 per cent slide leading declines on the FTSE 100.

EasyJet and Cineworld also ended lower.

Unilever proposed to ditch its dual Anglo-Dutch legal structure and create a single company in Britain to give it more flexibility for mergers and acquisitions. UK-listed shares of the company fell 1 per cent.

Europe

European stocks plunged the most in more than two months as investors weighed the magnitude of economic damage from the pandemic, putting a sharp halt to the powerful equity rally.

The Stoxx 600 Index dropped 4.1 per cent by the close, with shares in banks, autos and travel stocks leading losses. These so-called cyclical sectors that are most sensitive to the economy have led the advance in equities since mid-May.

Although European stocks had surged about 30 per cent to a high at the beginning of June, the recovery has stalled as investors took profits on gains for cyclical stocks, with defensive sectors such as health, food and beverages and utilities outperforming this week.

New York

US stocks slumped on Thursday with the S&P 500 and the Dow set for their steepest percentage declines since April 1st.

Wall Street’s fear gauge, the CBOE volatility index, rose to 32 points, its highest level since May 15th.

Boeing shed 9.1 per cent after its top supplier, Spirit AeroSystems Holdings, announced a 21-day layoff for staff doing production and support work for Boeing’s 737 programme. Spirit AeroSystems tumbled 12.1 per cent.

Shares of banks, which tend to benefit in a higher rate environment, slipped 6.6 per cent, extending losses after Fed policymakers saw key overnight interest rates remaining near zero through at least 2022.

Shares of airlines and cruise operators were some of the biggest percentage losers on the S&P 500. The S&P 1500 airlines index tumbled 9.2 per cent, while Norwegian Cruise Line Holdings and Royal Caribbean Cruises slumped 13.6 per cent and 8.2 per cent, respectively. – Additional reporting: Reuters/Bloomberg