Investors stay cautious despite commodity stock rally

European stocks declined less steeply than on Tuesday, as commodity producers rebounded from a sell-off. However, investors remained cautious about commodities, on the grounds that concerns about a slowdown in the Chinese economy haven’t gone away.

There was little comfort from data showing China’s factory-gate prices dropped for a record 45th straight month in November, reflecting weaker demand for industrial goods and commodities.

DUBLIN

Trading may have already slipped into pre-Christmas mode on the Irish Stock Exchange, with few Dublin-listed stocks attracting significant investor attention. A brief rally in the afternoon evaporated fast and the general trend was down on a day of thin volumes. The Iseq closed down 0.5 per cent.

Bank of Ireland, recently the subject of a downgrade by analysts at Davy Research, closed the day flat at 33 cent, while building materials group CRH also lacked momentum, finishing down 0.4 per cent at €26.88.

Ryanair was down 0.9 per cent at €14.45, while paper and packaging group Smurfit Kappa was weaker, closing down 1.9 per cent at €23.40, and food group Kerry finished at €76.10, down 1 per cent.

LONDON

The FTSE 100 steadied at the finish of trading, recovering after early losses on the back of a rally in commodity stocks, which in turn followed a sharp rise in prices of industrial metals and oil. The index of blue-chip shares closed 0.1 per cent weaker, having fallen 1.4 per cent in Tuesday’s session.

The UK mining and oil and gas indexes climbed 3.2 per cent and 1.5 per cent respectively, after metals prices gained on higher Chinese imports and hopes for output cuts, while crude oil prices advanced following lower crude storage figures from the US.

Glencore, Rio Tinto, BHP Billiton, BG Group and Royal Dutch Shell all posted gains, but struggling Anglo American was down 1.2 per cent after hitting a new record low. Among mid-caps, Stagecoach fell 14.4 per cent. The British rail and bus operator said people had avoided travel to big cities since the terrorist attacks in Paris in mid-November, forcing it to "modestly" downgrade its annual earnings forecast.

EUROPE

The Stoxx Europe 600 Index finished 0.4 per cent lower at the close of trading, after rising as much as 0.4 per cent earlier in the day. While the losses were less brutal than they had been on Tuesday, stock-watchers reported that investors were struggling to identify the next source of momentum.

The Stoxx 600 has fallen 5.5 per cent in December amid a rout in commodity producers and disappointment over the European Central Bank’s last meeting.

German pharmaceutical company Bayer slid 2.1 per cent after the European Medicines Agency began to investigate a trial of the company's best-selling prescription drug.

Volkswagen rallied 6.2 per cent to €131.75 in Frankfurt after the German carmaker said its emissions scandal affects fewer vehicles than initially thought. Volkswagen chief executive Matthias Müller is due to give his first extended press conference on the matter today.

US

Stocks fell in early trading in the United States as a drop for Apple and other technology shares overshadowed the better day for commodity companies. Apple sank 2 per cent, the most in more than three weeks, to $115.93, making it the biggest drag on the Nasdaq and the S&P 500.

Yahoo was down 3.1 per cent at $33.74, after the its board decided not to sell its Alibaba stake. Alibaba was down 0.23 per cent at $84.19.

Investors are watching economic data for evidence that the US recovery is solid enough to withstand higher borrowing costs, should the Federal Reserve lift interest rates at its meeting next week. The central bank has not raised rates since June 2006.

– (Additional reporting: Bloomberg / Reuters)