ECB rates freeze leads euro zone shares to underperform their peers

Euro zone shares underperformed their broader European peers on Thursday, hit by a stronger euro after the European Central Bank kept rates untouched but did not provide the outlook that investors had anticipated.

Dublin

The Iseq fell 0.85 per cent, as key stocks declined. Bank stocks reversed, with Bank of Ireland declining 4.5 per cent to just below €4.60, and AIB and Permanent TSB also in the red on what was a weak day for financial stocks across Europe.

Ryanair fell 0.6 per cent to €10.44 and building materials group CRH ended almost 0.8 per cent lower at €28.46. Packaging group Smurfit Kappa dropped 1 per cent to close at €24.77.

The real estate investment trust stocks were better performers, with Green Reit finishing up 1 per cent at €1.77, Hibernia Reit up 0.6 per cent at almost €1.39 and Ires Reit up 0.5 per cent at €1.64. Dalata Hotel Group also had a good day, ending 0.5 per cent higher at €5.57.

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London

The FTSE 100 rose 0.6 per cent, while the mid-cap FTSE 250 ended marginally lower.

Most of the FTSE 100’s gains came earlier in the session as worries over Washington’s escalating trade tensions with Beijing and Mexico gave way to hopes that major central banks would provide fresh stimulus in response.

On a good day for defensive picks, tobacco company Imperial Brands jumped 5.7 per cent on its best day in more than a year.

However, supermarket chain Sainsbury, retailer Kingfisher and telecoms giant Vodafone shed between 3.8 per cent and 4.8 per cent as the stocks traded ex-dividend.

Investors in insurance company Aviva reacted positively to news it is to cut 1,800 jobs, with the stock closing up 0.7 per cent, having traded higher earlier in the session.

The mid-cap index was cushioned by Peppa Pig maker Entertainment One, which surged 16 per cent, recouping almost all of its losses from the previous session. The company denied media reports that president Mark Gordon was to leave.

Europe

Euro zone equities fell 0.2 per cent, while the pan-European Stoxx 600 marked time. A firmer euro trims the value of euro zone companies’ overseas earnings when converted back to the common currency, hitting their overall profitability. Germany’s Dax lost 0.2 per cent, while French stocks fell 0.3 per cent.

European lenders had a torrid day, flipping into negative territory, as the ECB did not detail as generous a cheap loan lending programme for banks as investors had expected.

Milan-traded equities edged up, although Italian lenders reversed early gains with UniCredit falling 1.1 per cent, while Banco BPM dropped 2 per cent.

Auto-makers and their suppliers declined 0.9 per cent, as Renault dived 6.4 per cent after Fiat Chrysler Automobiles walked away from an over $35 billion merger with the French carmaker.

Reports that Berlin authorities were planning to impose a rental cap hit German property firms Vonovia and Deutsche Wohnen, which fell 4.7 per cent and 7.7 per cent respectively.

US

Wall Street eked out gains in choppy early trading as hopes of an interest rate cut outweighed fears of a flare up in US-China trade tensions after comments from president Donald Trump.

The energy sector, which was the hardest hit by the recent escalation in trade tensions, rose 1 per cent, the most among the major S&P sectors, as oil prices gained.

Oil majors Exxon Mobil and Chevron provided the biggest support with a gain of 1.4 per cent. Advanced Micro Devices rose 5.6 per cent after analysts at Morgan Stanley upgraded the chipmaker's stock to "equal-weight" from "underweight". – Additional reporting: Reuters / Bloomberg.