Business

European shares dip amid concerns over pace of ECB rate cuts

On the Iseq banking stocks were largely higher, with AIB gaining

The London Stock Exchange. The FTSE 100 eased back by 0.2 per cent, pausing after a run of record highs and ahead of a reading of UK inflation next week that will set near-term expectations for the timing of a first interest rate cut. Photograph: Hollie Adams/Bloomberg

Joe Brennan
Fri May 17 2024 - 18:11

European shares dipped on Friday as a European Central Bank (ECB) policymaker reined in expectations about the pace at which rates will be cut.

ECB executive board member Isabel Schnabel advocated caution about further interest rate cuts after a likely first one in June, bringing uncertainties about the outlook for rate reductions to the fore.

The pan-European Stoxx 600 dipped 0.1 per cent, with the rate-sensitive real-estate sector among top decliners, pressured by higher euro-zone bond yields.

Dublin

The Iseq All-Share index dipped 0.2 per cent to 10,009.22, with Ryanair declining 1.3 per cent to €18.36 amid ongoing concerns about summer fares.

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Banking stocks were largely higher, with AIB gaining 1.4 per cent to €5.13 and Bank of Ireland advancing 2.3 per cent to €10.38, as sector followers mulled the latest noises from ECB officials. Banks typically make more money in a high-rates environment – as long as it does not lead to a spike in customer defaults.

PTSB ended the session unchanged.

Housebuilders were also in demand, with Cairn Homes rising 1.8 per cent to €1.73 and Glenveagh Properties advancing 1.2 per cent to €1.38, as data this week from the Central Statistics Office showed that house prices are continuing to grow strongly as demand continues to far outstrip supply.

However, market heavyweights such as Smurfit Kappa, down 0.1 per cent, Kerry Group, off 0.3 per cent, and Ryanair, which lost 1.3 per cent, weighed on Iseq.

London

London’s FTSE 100 eased back by 0.2 per cent, pausing after a run of record highs and in advance of a reading of UK inflation next week that will set near-term expectations for the timing of a first interest rate cut.

The personal goods sector led Friday’s decline, falling 2.3 per cent, followed by automobile parts, which slipped 1.7 per cent.

A 2.4 per cent gain in precious metal miners, tracking higher gold prices and a surge in silver, partly offset the losses.

For the week, the industrial support services sector outperformed, finishing 3.3 per cent

Consumer healthcare firm Haleon fell 1 per cent after drugmaker GSK sold its entire remaining stake in the company, raising £1.25 billion (€1.46 billion).

was down 3.3 per cent after Morgan Stanley cut its rating and target price on the stock.

Land Securities Group fell 2.6 per cent despite the commercial property firm posting a smaller annual loss, with elevated interest rates continuing to weigh on the valuation of its buildings.

Europe

Azelis fell 13 per cent to notch its worst day on record after major shareholders EQT Partners and PSP Investments sold shares in the specialty chemicals maker.

Nibe lost 11.9 per cent and bottomed the Stoxx 600 index as Citigroup downgraded the Swedish heat-pump maker to “neutral” from “buy”.

On the flip side, Switzerland’s main index outperformed, driven by a 5.3 per cent rise in Richemont after the luxury company reported what Jefferies analysts described as “reassuringly resilient” fourth-quarter results, and naming Nicolas Bos as group chief executive. The broader luxury sector was up 1 per cent.

Germany’s main index was flat, with utility firm E.ON down 5.2 per cent on trading ex-dividend.

Swedish tech group Lagercrantz Group jumped 5.3 per cent after reporting fourth-quarter earnings, while H&M rose 3.4 per cent after RBC upgraded the fashion retailer to outperform, the equivalent of a buy.

French reinsurer Scor dropped 6 per cent after first-quarter results missed expectations.

New York

Wall Street’s main indexes were little changed in early afternoon trading as investors took a breather from the week’s rally driven by growing expectations of US interest-rate cuts this year.

The S&P 500 and Nasdaq were on course for a fourth straight week of gains, while the blue-chip Dow was on track for its fifth weekly advance, supported by strong quarterly results and slowing inflation data that has bolstered the case for rate cuts from the Federal Reserve.

Advanced Micro Devices gained after Microsoft said it plans to offer its cloud computing customers a platform of AMD artificial intelligence chips that will compete with components made by Nvidia.

Nvidia dipped slightly in advance of its quarterly results next week.

Reddit rose on partnering with OpenAI to bring its content to ChatGPT. – Additional reporting: Reuters

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times

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