European shares fall as ECB leaves policy unchanged

Major European bourses closed lower on Thursday after the European Central Bank (ECB) kept its policy rates unchanged and said its existing stimulus measures were sufficient and likely to be used in full.

The pan-European Stoxx 600 index dropped 0.6 per cent as ECB president Christine Lagarde said the central bank was carefully watching the implications of a strong euro.

With the economic recovery losing momentum there is an expectation that the bank will at some point provide more stimulus. "The balanced tone struck by the ECB at today's meeting was less dovish than many investors may have been expecting," said Jai Malhi, global market strategist at JP Morgan Asset Management.

“The lack of policy change at the ECB is much more to do with the reduced effectiveness of the remaining options at its disposal rather than the central bank being comfortable with the current state of the economy.”

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Markets closely followed the latest back and forth between the UK and the European Union involving Britain's exit from the bloc. The EU told Britain it should urgently scrap a plan to break their divorce treaty but prime minister Boris Johnson's government refused and instead pressed ahead with a draft law that could sink four years of Brexit talks.

Dublin

The Iseq was only marginally down at 6,342, effectively outperforming its European peers. Swiss-Irish baked goods specialist Aryzta closed up 1.5 per cent at 57 cent. This was before the company confirmed it was in advanced talks to be taken over by a unit of US activist hedge fund group Elliott Management, led by billionaire Paul Singer.

Aryzta announced on May 13th that it had hired investment bank Rothschild to carry out a "strategic review" of the business amid an ongoing decline in the value of its shares linked in part to its underperforming US arm. In tandem with their European counterparts, Bank of Ireland and AIB fell by 2.5 per cent and 2.7 per cent on the back of less accommodative soundings from the ECB.

Iseq heavyweight Ryanair was up 2.5 per cent at €12.12 while housebuilder Cairn Homes fell 0.6 per cent following reports it has agreed to buy a 1.35-acre site in Dublin from a company linked to one of its founding directors, Scottish accountant Alan McIntosh, for €14 million.

London

Supermarket Morrisons led declines on London’s blue chip share index and sparked falls among its grocery rivals after revealing a heavy hit from the pandemic. The Bradford-based retailer saw shares drop 5 per cnet after results showing it booked £155 million in costs related to the crisis, which knocked profits despite surging grocery sales.

The wider FTSE 100 Index closed 9.5 points lower at 6003.3, losing nearly all of its early session gains . Sainsbury's droped 2 per cent lower, off 3.9p to 187.9p, while Tesco also shed around 2 per cent , down 3.6p to 220p. David Madden, market analyst at CMC Markets, said: "The pandemic has proved to be a double-edged sword for most retailers that stayed open during the crisis, because health and safety overheads jumped."

Airlines were once again at the front of investors' minds, with British Airways owner IAG the latest to announce capacity cuts in the face of an ever-expanding quarantine list of countries.

Europe

Rate-sensitive European banks fell 0.5 per cent, while travel and leisure stocks bounced 0.7 per cent following steep declines in the previous session. Among stocks, LVMH shares rose 0.1 per cent, as the French luxury goods group said it would counter-sue Tiffany, accusing it of mismanagement through the coronavirus crisis after the US jeweller accused the French group of trying to bow out of a $16 billion acquisition deal.

Buyout firm EQT rose 2 per cent on readying a sale of German energy services firm Getec as it seeks to benefit from high valuations for energy infrastructure assets, people familiar with the matter said.

Volkswagen's trucks arm Traton dropped 1 per cent after it upped its takeover offer for US peer Navistar to $43.00 per Navistar share, up from $35 per share. Games Workshop jumped 11.7 per cent to the top of the Stoxx 600 after saying trading in the three months to end August had topped its expectations.

New York

The S&P 500 fell in volatile trading on Thursday as heavyweight tech-related stocks slipped after a sharp rebound in the previous session, while elevated jobless claims underscored a patchy economic rebound.

Stay-at-home winners Apple, Microsoft and Netflix fell between 1 per cent and 1.6 per cent. Amazon rose 0.2 per cent and Tesla jumped 4.5 per cent, helping limit the Nasdaq's losses. "It's going to be a battle for the next couple of days from investors who are trying to pick spots to get back into technology and traders who are using some of these sharp rallies to take profit," said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

Wall Street’s main indexes bounced on Wednesday from their biggest three-day rout since March, as investors returned to tech-focused stocks that are deemed insulated from the current economic downturn. – Additional reporting: Reuters