European stocks rally for second day

EUROPEAN STOCKS rallied, completing their biggest two-day gain since November, after China cut interest rates and Spain successfully sold bonds on the market, although at an elevated interest rate. However, indications from Federal Reserve chairman Ben Bernanke that the US would not provide further stimulus imminently dampened sentiment somewhat.

DUBLIN

THE ISEQ index mirrored the general European rally, although as with other European markets it came off slightly at the end of the day.

Volumes were relatively light. Positive May passenger figures from both Aer Lingus and Ryanair buoyed both stocks, with one analyst noting that Ryanair’s recent downbeat assessment of its expected performance this year was increasingly looking too conservative.

Aer Lingus ended up 2.7 per cent higher at €0.955, while Ryanair added 1.7 per cent to close at €4.065.

CRH gave up some of Wednesday’s gains, shedding 1.6 per cent to close at €13.705, with some profit-taking in action.

Exploration companies had a good day.

Tullow, which is also listed in London, stayed steady at €17.48, after the oil company announced it had found oil at its Paon-1X exploration well off Ivory Coast.

Dragon Oil, which announced a $200 million share buyback programme on Wednesday, consolidated the previous session’s gains, adding 3 per cent to close at €6.66.

INM shed 3.7 per cent to close at €0.26 ahead of its agm today and amid further share buying by Dermot Desmond and continuing courtroom controversy surrounding the departure of Gavin O’Reilly as chief executive.

LONDON

THE FTSE 100 hit a three-week high boosted by China’s surprise move to cut interest rates and positive UK services sector data.

Sectors whose fate is linked with economic conditions made solid gains, with the UK banking index, miners and energy shares up 1.5 per cent to 2.5 per cent.

However, investors hungry for hints of more stimulus from central banks were disappointed as the Bank of England left its policy unchanged.

Federal Reserve chairman Ben Bernanke also offered little to suggest that further monetary stimulus was imminent.

The FTSE 100 lost some shine in late trading, and closed below a session high.

Burberry rose the most in more than six months after Credit Suisse upgraded the stock, saying most high-end department stores it surveyed plan to dedicate more space to the trenchcoat maker.

Burberry advanced 5.1 per cent to 1,392 pence at the 4.30pm close of trading in London, the biggest jump since November 30th and the second biggest gainer on the FTSE 100 index. Tullow Oil added 2.1 per cent.

EUROPE

EUROPEAN SHARES rose yesterday but ended well off a session peak as the upbeat mood sparked by a Chinese rate cut ebbed after comments from the head of the US Federal Reserve gave few hints further monetary stimulus was imminent.

The FTSEurofirst 300 nevertheless advanced 1.1 per cent to 984.62 points, its highest close since May 29th. After European markets closed Fitch Ratings lowered Spain’s debt to BBB from A, with a negative outlook.

Previously in the session the extra yield investors demand to hold Spanish 10-year bonds instead of benchmark German bunds declined 23 basis points to 471 basis points, or 4.71 percentage points.

Rio Tinto Group and Anglo American led a surge by metal producers, rising at least 2 per cent. Spanish banks also advanced after the country beat its €2.07 billion target at a bond sale.

Vivendi jumped 3.7 per cent after the company was said to have decided to discuss whether to sell its video-game unit at a meeting this month.

The Stoxx 600 gained 1.1 per cent to 242.64 at the close of trading, extending yesterday’s 2.3 per cent advance after the ECB said it would act if necessary as the outlook for growth deteriorates.

Johnson Matthey climbed 4.9 per cent after the maker of a third of all auto-catalysts reported a 74 per cent jump in full-year profit and said it would pay a special dividend.

US

US STOCKS advanced in early trade, although stocks pared their rally as Bernanke said the central bank would assess the economy before deciding if more stimulus was needed.

Caterpillar and United Technologies added at least 1.4 per cent to pace gains in industrial shares in morning trade.

Best Buy fell 4.6 per cent as chairman Richard Schulze resigned from the board and will explore options for his stake.

Men’s Wearhouse, a Houston-based clothing chain, dropped the most in four years after forecasting second-quarter earnings that trailed analysts’ estimates. – (additional reporting: Reuters/ Bloomberg)