Markets reassured by central banks

AHEAD OF tomorrow’s Greek elections, markets expelled a sigh of relief yesterday, advancing on the back of commitments from central banks around the world that they would prop up liquidity in global markets if needed pending the outcome of the election.

DUBLIN

STOCKS ROSE in line with European trends as a strong performance from CRH saw the Iseq finish the day up by 2 per cent at 3,069.58.

The building and construction firm added 47 cent or 3.4 per cent to finish the day up at €14.11 as it moved in line with the sector overall in Europe.

Elsewhere, a bit more optimism crept into the market, with Bank of Ireland adding 2.2 per cent, and Ryanair shaking off a referral by the UK Office of Fair Trading to gain 3 cent, or 0.9 per cent, to climb to €3.87.

The Office of Fair Trading yesterday referred Ryanair’s acquisition of a minority stake in Aer Lingus to the Competition Commission for further investigation on the grounds that it may lead to reduced competition on routes between the UK and Ireland.

Trading in Aer Lingus was “pretty quiet” and it finished up fairly flat on the day, down by 0.6 per cent at € 0.93.

Dragon Oil was another strong performer as it advanced by 20 cent, or 2.9 per cent, to close up at € 6.91.

Kingspan added 5 cent, or 0.8 per cent, to finish up on the day at € 6.60.

However, volumes were very weak overall, with one broker noting that investors did not want to be left exposed ahead of the weekend’s events.

“A lot of decision-making is being postponed,” he said.

Indeed just 20,000 shares of Kingspan were traded in Dublin.

Independent News Media continued its turbulent run yesterday, giving up 2.4 per cent to close down at €0.21, as it announced it would delist from the New Zealand Stock Exchange on June 22nd.

It will retain its listing in Dublin and London.

LONDON

UK STOCKS rose, with the FTSE 100 index climbing for a second week as lenders rallied after the Bank of England unveiled measures to combat an escalation of the euro area’s debt crisis.

The UK’s FTSE 100 added 0.2 per cent to climb to 5,478.81, extending its weekly gain to 0.8 per cent.

Royal Bank of Scotland Group and Lloyds Banking Group both jumped more than 4 per cent as Bank of England governor Mervyn King said in a speech that the case for more stimulus in the UK was growing.

He also unveiled two plans to improve cash supply to the banking system.

“Given there is so much uncertainty, markets do like the idea of any sort of decisive action by policy-makers, let alone anything that is stimulative,” said Richard Hunter, head of equities at Hargreaves Lansdown in London.

“As a result banks have been marked higher.”

EUROPE

EUROPEAN STOCKS rose to the highest this month on the back of optimism that central banks will take steps to protect and stimulate the global economy.

“The Greek elections won’t add more clarity for the markets, but a clear positive is that investors increasingly believe that central banks are ready to act after the elections – whatever the outcome may be,” said Lars Knudsen, a portfolio manager at LGT Capital Management in Pfaeffikon, Switzerland.

“Markets see a decreasing likelihood of contagion to the euro zone,” he added.

The Stoxx Europe 600 Index climbed 1 per cent to 244.21, the highest since May 29th, although it still lags its March 16th high by 10 per cent.

Germany’s DAX rallied 1.5 per cent, and France’s CAC 40 climbed by 1.8 per cent.

The world’s second largest retailer, Carrefour, gained 5.9 per cent to climb to €14.49 after it agreed to sell its stake in a Greek joint venture, reducing its exposure to southern Europe at a cost of €220 million.

Fiat, the Italian carmaker, jumped by 5.5 per cent to €3.66 after chief executive Sergio Marchionne said the company was cutting investments in Europe by €500 million on concern the region’s auto market would not recover in the second half of the year.

US

THE SP 500 headed towards a second weekly rally, as nine of 10 SP 500 groups rose and commodity and technology shares had the biggest gains, even as economic data disappointed.

Industrial production unexpectedly fell in May for the second time in three months as factories turned out fewer vehicles and consumer goods.

Confidence among US consumers declined in June to the lowest level this year, and manufacturing in the New York region expanded in June at the slowest pace in seven months.

Microsoft and Dow Chemical climbed by at least 2 per cent.