Tracker impact wanes with AIB reversing losses and closing up
In US, lower corporate tax rates and growth expectations boost market sentiment
AIB reversed losses on Thursday after around €600m was wiped off its market cap. Photograph: Cyril Byrne
Thursday proved a quiet day on the Irish Stock Exchange with the banks seeing good volume compared to other stocks. The effect of news on the tracker mortgage investigation earlier in the week appeared to be waning, with Ireland’s biggest banks both up on the day. The Iseq overall index closed up by 0.29 per cent.
Britain’s top stock index shot up to a record high on Thursday in thin pre-holiday trade, supported by buoyant commodity stocks and a late dip in sterling.
Meanwhile, Wall Street’s main indices rose on Thursday as investors expected lower corporate tax rates to encourage companies to spend their additional capital on dividends, new projects and wage hikes.
AIB shares jumped 0.5 per cent, having slumped 3.8 per cent on Wednesday from their highest level since floating in June – a move that wiped €600 million off the bank’s market value – as investors fretted about the rising cost of the tracker mortgages scandal.
Analysts estimate the bank may have to increase its provisions for the tracker controversy from €190 million to as high as €240 million as it disclosed thousands of additional impacted customers this week.
Bank of Ireland, meanwhile, edged up by 1.89 per cent to €7.17 on relatively strong volume – apparently unaffected by the news surrounding tracker mortgages – while Permanent TSB lost 0.44 per cent to close at €2.25.
Elsewhere, Greencoat Renewables acquired Dromadda More, a Kerry-based wind farm, for €88.4 million. The company was unchanged at €1.07 after it also said it agreed a new €250 million revolving credit facility with five banks.
The FTSE 100 rose above the 7,600 points mark for the first time, ending up 1.1 per cent and outperforming mild gains seen in the broader European market.
British consumer morale sank to a four-year low this month, bucking economists’ expectations for it to hold steady and extending this year’s downward trend as inflation crimped household spending, Gfk data showed.
On Thursday, the energy sector contributed the most to gains in the FTSE with shares in BP and Royal Dutch Shell rising 2.1 and 1.6 per cent respectively.
A recovery in heavyweight British American Tobacco, up 1.9 per cent, also provided support as investors calculated the extent to which US tax reform could help US-exposed companies.
Miners Glencore and BHP Billiton also made gains.
The pan-European Stoxx 600 index ended the session with a 0.6 per cent gain.
Spain’s Ibex was up 1 per cent, shrugging off any jitters over a regional Catalan election in Spain. Shares in Spanish banks Caixabank, Sabadell and Santander all gained between 1.5 per cent and 2.1 per cent.
While corporate news was scarce with the end of the year nearing, Nokia was among the best performers on the Stoxx 600, rising 4 per cent after announcing a patent agreement with China’s Huawei.
Scandal-hit Steinhoff, parent of the Dealz retail chain, saw a volatile trading session, ending 0.7 per cent higher after falling as much as 17 per cent earlier in the session.
A number of companies, including AT&T, Wells Fargo and Boeing, have promised higher pay for workers or more investment in training. Some others have forecast a rise in earnings due to tax cuts approved by Congress this week.
The bank stocks were the biggest drivers on the S&P and the Dow. The gains also came after latest gross domestic product data showed the US economy grew at its fastest pace in more than two years in the third quarter. Another economic indicator showed a jump in the number of Americans filing for unemployment benefits last week, but the underlying trend in jobless claims remained consistent with a tightening labour market.
Accenture shares hit a record high at $158.40 after the consulting and outsourcing services provider reported strong quarterly profit, driven by digital and cloud services business. – Additional reporting: Reuters