Healthcare rally buoys nervy markets

Investors fear worst quarterly earnings season since global financial crisis

European stock markets closed higher after a volatile session on Monday, recovering losses caused by a collapse in oil prices and fears of the worst quarterly earnings season since the global financial crisis.

Healthcare stocks led the charge, marching to over six-week highs after drugmaker Novartis won the go-ahead from the US Food and Drug Administration to conduct a randomised trial of malaria drug hydroxychloroquine against Covid-19. The pan-European Stoxx 600 index closed up 0.7 per cent, after losing as much as 1.2 per cent during the session as oil prices plunged due to oversupply concerns. The energy sector posted its fourth decline in five sessions.


Dublin's Iseq closed down 0.8 per cent after failing to benefit from the healthcare rally elsewhere. Iseq heavyweight Ryanair was down again, closing the session just under €10 after rival Virgin Atlantic warned it would survive the coronavirus outbreak only if it got financial support from the UK government.

Paddy Power owner Flutter Entertainment traded marginally down at €102.25 after saying it would issue shares priced at £79.38 (€90.89) in place of the cash dividend it originally intended paying investors. The move is being done to preserve cash in the face of a Covid-19 slump in betting.


Packaging group Smurfit Kappa was down 1.3 per cent at €25.72 while insulation giant Kingspan fell 2.7 per cent to €43.34. Both companies were dragged lower on the back of general market unease over whether forecasts adequately captured the scale of the reversal facing the global economy.

In line with the weaker trend for financials across Europe, Bank of Ireland shed 3.5 per cent but rival AIB fared better, dropping only 0.3 per cent.


Britain’s Ftse 100 stock index ended a volatile session slightly higher on Monday, helped by consumer staple giants and drugmakers, but a collapse in oil prices and nerves about the corporate earnings season kept a lid on the gains.

The blue-chip index rose 0.5 per cent, boosted by a 4 per cent jump in Unilever and Reckit Benckiser, and a 2 per cent rise in AstraZeneca. However, Royal Dutch Shell and BP fell 2 per cent and 0.4 per cent, respectively, as the US crude futures contract plunged more than 50 per cent on worries about lack of storage and a weakening global economy.

The Ftse 250 midcap index, guided more by the outlook for the domestic economy, slipped 0.2 per cent as UK officials said it was too soon to talk about easing the lockdown imposed to control the spread of the coronavirus. After a late rally last week on signs of a possible gradual restarting of economies, stock markets globally pulled back on Monday as investors braced for dismal earnings reports and economic data.

“Now we’ve got people asking companies questions that have never been asked: how many weeks or months of liquidity do you have looking at your current cash flow and revenue if the lockdown lasted longer?” said Benji Dawes, who co-manages the UK Growth Fund at Premier Miton.


Ray-Ban maker EssilorLuxottica became the latest company to scrap its dividend and said it could consider cost cuts to shore up cash reserves. Its shares fell 0.8 per cent. "On one hand we're getting the reality check of company earnings and real data from the global and European economy, but on the other hand we've got the impact of significant fiscal and monetary stimulus coming through," said Richard Dunbar, head of multi-asset research at Aberdeen Standard Investments. Readings on April manufacturing from across the world are due on Thursday and are expected to hit recession-era lows. Dutch health technology company Philips rose 6.1 per cent after saying sales and profit margins could still rise in 2020 if the pandemic were to ease in coming months.


A slide in energy stocks weighed on Wall Street on Monday as crude prices crashed at the start of a week packed with quarterly earnings reports and economic data likely to underline the damage from the coronavirus outbreak. The S&P 500 energy index shed 2.8 per cent and was on track for its sixth slide in seven sessions as the US West Texas Intermediate (WTI) contract fell 35 per cent to its lowest since 1998 on concerns of oversupply. Exxon Mobil and Chevron tumbled more than 3 per cent and were among the biggest decliners on the blue-chip Dow Jones index. All the major S&P 500 subindexes were trading lower, but declines on the Nasdaq were limited by Amazon and Netflix – deemed "stay-at-home" stocks as widespread lockdowns fuelled demand for online streaming and home delivery of goods. – Additional reporting: Reuters

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times