European shares fall as currency movements dominate

European shares fell on Tuesday as currency movements dominated the focus across financial markets with investors mulling comments from US president-elect Donald Trump that the dollar is "too strong", and sterling rallied after UK prime minister Theresa May spelled out her plans for Brexit.

Traders globally were puzzled to read Mr Trump's comments in an interview with the Wall Street Journal before his inauguration on Friday – departing from a tradition of incoming presidents refraining from commenting on the greenback in the run-up to taking up office.

But buyers of sterling seemed to take some comfort from the fact that Ms May used a key speech on Tuesday on Brexit to accompany her widely-anticipated "hard Brexit" plans by saying she will put a final divorce deal with the European Union before both houses of parliament in London.

DUBLIN

The Iseq index of Irish shares fell by 0.1 per cent to 6,570.47, with Irish Continental down 2.8 per cent at €4.45 and Kerry Group off 1.2 per cent at €68.35 leading large-caps lower.

Irish Stock Exchange equities turnover rose 6.3% in 2016

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Sterling at three-month low, stocks weak ahead of May’s speech

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Irish importers buying sterling in bet that currency has bottomed

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Investors turn wary as Brexit, Trump uncertainty grows

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Losses at Kerry and CRH, which fell 0.6 per cent to €32.38, took place against a decline in the value of the dollar against the euro and other major currencies.

However, Bank of Ireland and C&C were in demand, rising 2.1 per cent to 24.5c and 1.3 per cent to €4.00, respectively. Both are among the most exposed Irish-listed companies to sterling fluctuations.

Smurfit Kappa added 1.2 per cent to €24.42, as the company managed to sell €500 million of bonds to refinance some loans from a group of banks. The coupon attached to the bonds was lower than had originally been expected.

Kingspan edged 0.2 per cent higher to €26.95, underpinned by a positive trading update from European peer Gerberit.

LONDON

The UK’s FTSE 100 Index tumbled the most since a slump in June spurred by the Brexit vote, as a surge in the pound following Ms May’s speech weighed on exporters.

The FTSE 100 Index, whose members get about three-quarters of their revenue overseas, fell 1.5 per cent at the close.

"May's speech did not have anything new that was not already known. However, with the pound bouncing, the dollars earners are coming under pressure," Jawaid Afsar, senior trader at Securequity, said.

Banking stocks rose, led by Standard Chartered, which ended 2.8 per cent higher, hitting a 16-month peak earlier in the session after Bank of America Merrill Lynch upgraded its rating on the stock to "buy" from "hold".

Royal Bank of Scotland gained 2.5 per cent, and Lloyds Banking Group rose 1.2 per cent.

Elsewhere, Rolls-Royce jumped 4.4 per cent after the British aero-engine maker settled a long-running bribery investigation and said 2016 profit would beat expectations. The announcement came after 18 months of cost-cutting and restructuring.

Mining companies also put pressure. The sector index fell 2.2 per cent following a drop in industrial metals prices.

EUROPE

The pan-European STOXX index ended 0.1 per cent lower, having fallen as much as 0.7 per cent just before Ms May began speaking.

Europe’s banking index ended little changed following a volatile session that saw it move from being one of top sectoral losers in Europe to a top gainer.

Within the sector, performances were mixed. Spain's Banco Popular rose 6.6 per ent after an upgrade to "buy" from Citigroup. UniCredit gained 2.7 per cent as Italian banks were underpinned by an upbeat note from Goldman Sachs.

Lufthansa rose as much as 7.3 per cent, attracting interest after an Italian newspaper reported Etihad Airways was interested in taking a stake in the German carrier.

NEW YORK

US stocks were under pressure in early afternoon trading, weighed down by financial and healthcare stocks.

Biotech and pharma stocks declined after Trump told the Washington Post that he would target companies over drug pricing and that he was ready to unveil a plan to replace Obamacare.

A trade war between the US and China and a strengthening dollar are among the biggest threats to a brightening global economic outlook, leading economists at the World Economic Forum in Davos felt.

By early afternoon, the Dow Jones Industrial Average was down 0.21 per cent, while the S&P 500 was off 0.19 per cent and the Nasdaq Composite 0.48 per cent lower.

– (Additional reporting: Reuters, Bloomberg)