Euro shares drop as Trump election dominates market activity

European shares dropped on Friday, dragged down by commodity producers after European Central Bank president Mario Draghi said the region's economy is not yet strong enough and still needs stimulus.

The Stoxx Europe 600 Index slipped 0.2 per cent, paring its weekly advance to 0.7 per cent in a week when Donald Trump’s election as the US’s next president continued to dominate activity on global markets.

All told, the European benchmark has risen more than 1 per cent since Mr Trump’s win, as expectations of fiscal stimulus under his administration propelled cyclical stocks, but falls in income stocks such as utilities have meant the index remains within the tight range it has been moving in for the past 16 weeks.

DUBLIN

Bucking the trend, the Iseq moved 0.3 to 6,294.2 on Friday.

Permanent TSB added almost 4 per cent to €2.78 after the lender confirmed that it had completed the sale of its last £2.29 billion (€2.67 billion) portfolio of UK home loans to private equity firm Cerberus.

Sentiment was also buoyed as the European Central Bank warned that efforts in the Dáil to give the Central Bank powers to cap interest rates would be unwise.

Grafton Group rose 1.4 per cent to £5.79 in London after it extended its footprint in the Netherlands with the purchase of a tools distributor for €33.4 million.

However, CRH lost 0.7 per cent to €31.84, after rival LafargeHolcim lowered its profit target for the medium term. While CRH stuck to its full-year aim of delivering earnings in excess of €3 billion, analysts had already been pencilling in a result above €3.1 billion.

Kenmare Resources lost 5.1 per cent to €2.80 in line with mining stocks elsewhere.

LONDON

The blue-chip FTSE 100 index closed 0.3 per cent lower at 6,775.77 points. The index, however, posted a small rise for the week, its second week in a row of gains.

Anglo American, Rio Tinto, Antofagasta, Fresnillo and Randgold Resources fell 2.9 to 6.9 per cent, pushing the broader UK mining index to close 2.6 per cent lower.

A rise in the dollar put pressure on greenback-denominated commodities, which become more expensive as a result for holders of foreign currency. The dollar strengthened after Thursday's comments from US Fed chair Janet Yellen that the Fed could raise interest rates "relatively soon".

Mid-cap gold miners also struggled, with Hochschild Mining and Centamin dropping 6.3 per cent and 5.5 per cent respectively.

The FTSE 250 index, however, was 0.3 per cent higher, supported by a 22 per cent surge in Electrocomponents. Shares in the electronic component distributor hit a 14-year high after it raised its cost savings target and reported a 76 per cent rise in first-half profit.

EUROPE

Italian stocks underperformed the broader stock market to fall 1.8 per cent after banks hit six-week lows, hurt by the prospect of a referendum vote on December 4th that could topple Matteo Renzi’s reformist government.

“The constitutional referendum in Italy on December 4th is another overhang that needs to be navigated first,” Berenberg said in a note. “And, should a No vote prevail, this would add further uncertainty to the political situation, putting more pressure on the banks and potentially making it more difficult for them to raise capital.”

Recent polls suggest Italians may reject Renzi's proposed constitutional reform and he has pledged to resign if he loses. Banco Popolare, UniCredit and Intesa Sanpaolo lost between 0.9 per cent and 5.2 per cent.

In the construction sector, LafargeHolcim rose 2.4 per cent even after it accompanied a disappointing profit outlook by saying it planned an improved payout for shareholders as well as a share buyback.

NEW YORK

US stocks were lower in early afternoon trading on Friday as health stocks weighed and investors cashed in after the post-election rally, but the three major indexes continued to hover near record levels.

The Nasdaq hit a record high earlier in the session, helped by a rise in Microsoft and other big tech stocks, before falling 0.2 per cent by early afternoon, with the Dow Jones Industrial Average and S&P indices also declining by 0.2 per cent.

US stocks had been on a tear since Mr Trump’s surprise victory last week as his proposals to increase infrastructure spending and reduce taxes are seen as benefiting the economy.

The rally lost steam this week as investors took to the sidelines, awaiting more clarity regarding Trump’s policies.

Among individual stocks, Gap and Abercrombie & Fitch fell more than 10 per cent after both retailers warned of a challenging holiday quarter.

Meanwhile, the US dollar climbed on Friday to its highest level since 2003 against a basket of other major currencies on continued bets on faster inflation and higher interest rates, while Treasuries resumed a sell-off that left benchmark yields on track to post their steepest two-week increase in 13 years.

The euro fell 0.3 per cent to $1.059 by early afternoon in New York.

– (Additional reporting: Bloomberg, Reuters)