Markets tread water while awaiting news from the Fed

Mark Paul, Business Affairs Correspondent

European stocks were little changed on Tuesday as investors speculated on the direction of US monetary policy at the Federal Reserve’s meeting, which will be announced tomorrow.

Britain's top shares index rose, lifted by gains in consumer goods stocks ranging from luxury fashion group Burberry to supermarket retailer Tesco.

Wall Street was also higher on Tuesday afternoon, helped by gains in healthcare stocks and an overall sentiment that the Fed might not raise interest rates.

The Iseq index in Dublin slipped 0.5 per cent.

DUBLIN

Ryanair had a difficult day on the exchange, finishing the session down close to 3.4 per cent. The stock was hit after a bearish report from respected European aviation analyst, Andrew Lobbenberg. He warned that the sector is in a cyclical downturn, singling out Ryanair as one stock that may be overpriced.

Irish Continental Group, the owner of Irish Ferries and a competitor of Ryanair on routes between Ireland and Britain, finished up 1.1 per cent.

Moody’s upgraded the ratings of Irish banks and deposits, citing improving credit conditions and rapid deleveraging of the private sector. It also said that limited competition gives the main Irish banks pricing power.

Bank of Ireland was up 2.7 per cent at one stage in late afternoon trading, but a flurry of late sellers in the market pushed it back to flat by the end of the session.

Providence Resources rose by more than 4 per cent, rallying after having been down by more than 8 per cent in the morning.

LONDON

Burberry climbed 3.6 per cent, the best-performing FTSE 100 stock in percentage terms. Analysts said investors appeared to be reacting favourably to its “see now, buy now” collection at London Fashion Week.

Tesco advanced 0.9 per cent after the latest Kantar grocery sales data showed it had achieved its best 12-week sales performance in more than two years. Shares in its rivals Sainsbury and Morrisons fell, with both companies reporting lower sales in contrast to Tesco.

Shares in Aer Lingus owner International Consolidated Airlines Group (IAG) fell 3.6 per cent, making it the worst performing FTSE 100 stock. It was hit by a downbeat outlook from rival Air France KLM, whose boss warned of a further decline in bookings in coming months as a result of Islamist militant attacks and a cabin crew strike.

EUROPE

LEG Immobilien led real estate stocks to the biggest gains on the European equity gauge today, rising 2.3 per cent after Société Générale recommended buying shares in the German property company, citing its underperformance compared with its peers.

Eni helped drag a gauge of oil-related companies to the worst performance on the Stoxx 600, falling 1.8 per cent, even as crude reversed earlier declines after Algeria said Opec may turn its planned informal meeting in Algiers next week into a formal session.

Banks were also among the biggest decliners, with Italian lenders Banca Popolare di Milano and Banca Popolare dell'Emilia Romagna falling 4.3 per cent or more. Deutsche Bank slid 3.8 per cent.

NEW YORK

The healthcare sector provided the biggest boost to the S&P 500 index, following Allergan's $1.7 billion acquisition, which has the markets speculating about the company's next deal move. Tobira Therapeutics' stock vaulted 700 per cent after Allergan agreed to buy the company, to raise access to its experimental drugs for Nash, an incurable fatty liver disease.

Gilead, which has a number of Nash drugs in its pipeline, rose 3.1 per cent on the announcement and was the biggest mover on the S&P and the Nasdaq.

DTS soared 23.2 per cent to $42.29 after Tessera Tech agreed to buy the audio equipment maker for $850 million in cash. Tessera's stock was up 2.7 per cent.

Marriott International received a go-ahead from Chinese regulators for its acquisition of Starwood Hotels. Shares of both the companies were up 2.3 per cent.

– (Additional reporting: Bloomberg/Reuters)