European shares close off highs as Fed move fuels coronavirus fears

European shares pulled back from their highs in late trading on Tuesday as US Federal Reserve chairman Jerome Powell signalled that the risks facing the country's economy had risen "materially" as the coronavirus spread.

The comments took away from an initial positive market response to the Fed’s decision to cut interest rates by half a percentage point in an emergency move to cushion the impact of the epidemic.

Group of Seven finance officials also pledged "appropriate", unspecific policy moves as the coronavirus spreads around the world, hitting sports events, trade exhibitions and other large gatherings worldwide.

The pan-European STOXX 600 index closed up 1.4 per cent, after surging as high as 3.3 per cent immediately after the rate cut. In Dublin, the Iseq index ended the session up 1.5 per cent at 6,486.69, having been 3.5 per cent ahead earlier.

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Dublin

Travel-related stocks were in demand as bargain hunters emerged from the sidelines, with ferries operator Irish Continental Group gaining 4.4 per cent to €4.01 and Ryanair edging 1.9 per cent higher to €11.88.

Cairn Homes jumped 3.3 per cent to €1.26 as the home maker increased its house-building targets, drawing supportive comments from analysts. Rival Glenveagh Properties moved 3.9 per cent higher to 80c.

Bucking the trend, Bank of Ireland lost 2.6 per cent to €3.20 and AIB, which reports full-year figures on Friday, declined by 2.3 per cent to €1.96, amid concerns that a fresh round of rate cuts by central banks will further squeeze incomes across the sector.

London

London’s bluechip FTSE 100 index ended the day 1 per cent higher, while the domestically focused mid-cap index rose 2 per cent.

Banks ended the day in the red, down 2.13 per cent, while miners and airlines up between 2.2 per cent and 2.8 per cent, after they were caught up in last week’s rout that erased over $5 trillion (€4.5 trillion) from global equity markets.

Marketing firm 4imprint Group jumped 15 per cent after saying it had so far seen minimal impact from the health crisis.

Aggreko, the world's largest temporary power provider, surged 5 per cent and was eyeing its best day in over seven months as it kept its 2020 targets and said preparations for the Tokyo Summer Olympics were "progressing well".

Europe

Growth-linked travel and leisure stocks ended 1.5 per cent higher, after eight straight days of declines as widespread travel curbs to contain the outbreak crushed passenger numbers and dented demand at hotels.

Spanish banks powered a 0.8 per cent rise for the Madrid bourse after the European Court of Justice ruled that it would be up to local judges to decide on a case-by-case basis if contentious mortgage clauses in the country were abusive.

Caixabank and Bankia rose 0.6 per cent and 3.7 per cent, respectively, on relief that the court did not decide on a blanket rejection of the clause.

German wholesaler Metro soared 19.2 per cent after US food distributor Sysco contacted the company about a potential takeover.

Qiagen jumped 17 per cent after US firm Thermo Fisher Scientific launched a €10.4 billion bid for the German genetic testing company.

New York

US stock markets were lower in early afternoon trade on worries that even a half percentage-point cut in interest rates might not be enough to stave off the economic impact of the coronavirus outbreak and halt the worst sell-off in more than a decade.

It was the Federal Reserve’s first emergency rate cut since the 2008 financial crisis, underscoring how grave the central bank views the fast-evolving situation.

Still, healthcare equipment maker Thermo Fisher Scientific rose after it launched its bid for Qiagen.

Electric-car maker Tesla gained after brokerage JMP Securities upgraded its rating on the stock.

-Additional reporting, Reuters