Market shares fall for a second day in Europe
Irish shares back in negative territory as Independent News & Media downgraded by Davy
Ryanair rose earlier in the session after reporting positive June traffic data, but closed down 3.3 per cent. Photograph: Alan Betson / The Irish Times
European shares extended declines into a second day amid indications the region’s economic growth lacks momentum in the wake of the Brexit vote.
The Stoxx Europe 600 Index dropped 1.7 per cent. All 19 industry groups retreated, with UK insurers sliding on signs of turmoil from the referendum. Purchasing managers’ indexes on manufacturing and services signalled lacklustre growth in the euro area in June, with indicators pointing to France as the weakest performer.
The Irish market had rebounded by 8.5 per cent in a four-day rally last week, recovering 40 per cent of losses from the aftermath of Britain’s vote to leave the EU. Bank of Ireland, the most heavily-exposed Irish lender to Brexit, led the Irish market lower, falling 7.6 per cent to 17 cents.
Ryanair gained altitude earlier in the session after reporting positive June traffic data, but ended down 3.3 per cent. CRH traded down 3.2 per cent amid concerns about the wider European economy. Independent News & Media fell 2.7 to 14.5 cents, after Davy downgraded its earnings forecasts for the group for this year and next on a view that paper advertising revenues will decline “in a post-Brexit environment”.
In spite of the overall rise for the market, the impact of the vote to quit the EU could be seen in the property and housebuilding sectors, where shares slumped. The Bank of England took steps so that British banks keep lending and insurers do not dump corporate bonds in what it said was a “challenging” period likely to follow the Brexit vote. The measures pushed down sterling, which in turn gave a lift to the FTSE 100, since a weaker pound can help exports from the index’s international companies.
Standard Life and Aviva fell at least 3.7 per cent after their investment units suspended trading in their real-estate funds, as investors demanded their money back in the wake of Britain’s vote to leave the EU. Similarly, Prudential’s M&G division suspended trading in its £4.4 billion (€5.2 billion) UK property fund.
Housebuilder Barratt Development dropped 9.8 per cent while rival Persimmon fell 7.2 per cent, despite Persimmon reporting higher first-half revenues. Shares in Royal Bank of Scotland and Lloyds, which are exposed to the UK property sector, also fell.The FTSE 100 is up about 3 per cent since June 23rd, it remains down by about 10 percent in US dollar terms, as the slump in sterling has reduced the dollar value of the British market.
However, UniCredit edged up 0.7 per cent after Goldman Sachs upgraded it to buy from neutral even though the US broker said it was at high risk of contagion if smaller lenders failing.
Europe’s Stoxx 600 Basic Resources index, which contains mining stocks, fell more than 3 per cent, as copper prices eased from a two-month peak on concerns over Chinese demand.