Iseq hits fresh 2½ year low as Federal Reserve rattles global markets

The Iseq overall index of Irish shares dropped to a fresh 2½-year low on Thursday as markets sold off globally while investors digested the US Federal Reserve’s interest rates outlook from the previous day.

The Iseq dropped 1.2 per cent to 5,376.61, marking its lowest level since immediately after the UK Brexit referendum in June 2016.

The pan-European Stoxx 600 index closed 1.4 per cent lower.

After raising interest rates for the fourth time this year, the Fed signalled “some further gradual” rate hikes ahead, disappointing market expectations of a more dovish message from the world largest economy’s central bank.

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"Concerns in the US about the real estate sector and leveraged loans remain. It's clear that interest rates cannot continue to rise for long without having important consequences for economic growth," said Edoardo Fusco Femiano, market analyst at brokerage eToro.

DUBLIN

Aryzta led Irish large-caps lower, falling 3.6 per cent to 92 cent, while Bank of Ireland dropped 3.4 per cent to €4.98 and CRH, which accounts for a quarter of the Iseq, dipped 2.9 per cent to €21.84.

Homebuilders were also out of sorts with Cairn falling 2.2 per cent to €1.05, while Glenveagh declined by 2.2 per cent to 67 cent, with traders saying that investors are ignoring the positive fundamentals of the Irish sector to punish it in line with UK peers.

Bucking the trend, Smurfit Kappa climbed 4.2 per cent to €23.13, recovering some of the ground the boxmaker lost recently amid a wider packaging industry sell-off.

LONDON

The FTSE 100 closed down 0.8 per scent with the mid-cap index 0.9 per cent lower, after hitting multi-year lows in early trading.

In result-driven moves, Carnival tanked 10.8 per cent to the bottom of the main index after the world's largest cruise operator forecast an adjusted profit for the first quarter that missed market expectations.

Oil heavyweights Shell and BP were the biggest drags on the main index, as crude prices slipped back into negative territory.

Utilities, often seen as a safe haven, helped the main index recoup some losses. National Grid was up 2.4 per cent after a rating upgrade by CFRA, with Severn Trent and United Utilities also rising.

After starting the week with a profit warning from online fashion store ASOS that shook retail stocks, the shopping sector saw some good news as British retail sales topped expectations in November thanks to Black Friday promotions.

EUROPE

Among individual movers on Thursday, shares in Airbus fell 4.4 per cent after Le Monde newspaper reported the United States had opened an investigation into allegations of corruption, raising the stakes of probes already under way in Britain and France.

Shares in aluminium company Norsk Hydro fell nearly 3.5 percent and was among the top fallers in Europe after the United States said it would lift sanctions against its competitor Rusal.

After a strong 2017, analysts have been cutting their forecasts for euro zone 2018 earnings growth steadily throughout the year. They now expect a growth of around 4.4 percent, down from a peak of 10 per cent at the start of the year. Estimates for 2019 have also been cut.

WALL STREET

US stocks were lower in early afternoon trading, with the S&P 500 languishing at 15-month lows, as disappointing earnings reports added to the gloom after the Federal Reserve quashed hopes of a toned-down approach to its interest-rate hike trajectory.

Consumer discretionary stocks slid and consumer staples dropped as higher borrowing costs added to signs of slowing consumer spending in the run-up to Christmas.

Nike dropped ahead of its second-quarter results expected after markets close.

The spectre of rising borrowing costs only adds to worries of slowing corporate profit growth as economic growth slackens, with increasing fears of a recession, in the backdrop of the China-US trade war and other geopolitical concerns.

The Dow Jones Industrial Average was down 1.1 per cent, at 23,063.40, the S&P 500 was fell 1 per cent, and the Nasdaq Composite was down 1.4 per cent.

Shares of Walgreens Boots Alliance dropped as the drugstore chain's same-store sales missed estimates. – Additional reporting: Reuters, Bloomberg