Markets react as Draghi hints at ECB reduction in stimulus

The euro rallied against the US dollar on Tuesday after European Central Bank president Mario Draghi fuelled market expectations that the ECB would reduce stimulus later this year, while the dollar's weakness helped lift crude prices.

DUBLIN

The market was a bit weaker, with the Iseq down about 1.75 per cent. Industrial companies were generally lower. Both CRH and Kingspan dropped 2 per cent, which "kind of weighed things a little bit", according to an analyst with Davy.

Smurfit was flat on the day. Irish Continental Group and the REITs all suffered from a general weakness across the market. Bank of Ireland was also flat on the day.

NTMA sells €500m of short-term debt at negative rate

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Sterling hits one week high as government deal nears

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String of Hong Kong stocks in dramatic plunge

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Financials weigh on European shares while oil drags US markets

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Dalata had higher flows, up 2 per cent on the day. "The reality is there wasn't much value in it, but it had a high close," said the analyst.

LONDON

London’s premier index drifted lower after research pointing to a slump in consumer confidence took its toll on blue-chip stocks.

The FTSE 100 index closed down 12.44 points to 7,434.36, with the latest data from YouGov and the Centre for Economics and Business Research revealing a “pronounced collapse” in confidence following the general election.

The report showed a sharp drop from 109.1 in the week before the vote to 105.2 after, tracking levels seen in the aftermath of last year’s Brexit vote.

Shares in retail giant Next were down more than 1 per cent, or 45p, to 3,955p, while Marks & Spencer dropped close to 2 per cent, or 6.7p, to 336.6p.

Sterling's 0.5 per cent rise against the US dollar at 1.278 was also having an impact on multinational companies, with Hikma Pharmaceuticals sinking by 76p to 1,516p.

London-listed mining giants managed a strong session thanks to a robust economic update from China. Glencore was the biggest riser, up 10.5p to 287.7p, with Rio Tinto climbing 100p to 3,157p and Anglo American pushing 31.5p higher at 1,006p.

EUROPE

Hawkish comments from ECB president Mr Draghi hit interest rate-sensitive utilities shares, dragging down European indexes, while a warning from auto parts supplier Schaeffler hit the whole sector.

Draghi opened the door to tweaks in the bank’s aggressive stimulus policy, fuelling market expectations the bank would announce a reduction of stimulus as soon as September.

Utilities, whose constant dividends flows become less attractive when monetary policy tightens, fell 2.4 per cent, suffering their biggest one day loss since November. Shares in Spanish power network operator Red Electrica, Italian gas firm Italgas and German heavyweight utility E.ON were among the top losers in Europe with losses of more than 3 per cent.

Their losses helped drag the pan-European STOXX 600 index down 0.8 per cent.

However, shares in banks, which have long suffered from the ECB’s ultra-loose policy, were boosted by Draghi’s remarks, with the euro zone sectoral index ending up 1.4 per cent.

Shares in banks such as Caixa, Deutsche Bank, Sabadell and Bankia – which are more sensitive than others to the rate cycle – were among the top five euro zone bank gainers, all up over 2.4 per cent.

NEW YORK

The S&P 500 and the Dow Jones Industrial Average pared early losses in late morning trading as bank and consumer stocks rose on robust consumer confidence data, while the Nasdaq Composite was dragged lower by a fall in technology shares.

Bank of America was up 1.4 per cent and JPMorgan rose 0.8 per cent, providing the biggest boost to the S&P. The consumer discretionary index sector inched up 0.12 per cent, with Home Depot boosting the Dow.

The technology index fell 0.39 per cent due to a drop in the shares of Apple, Microsoft and Alphabet. Alphabet fell 1 per cent to $962.64 after EU antitrust regulators hit the tech giant with a record $2.7 billion fine.

Since the beginning of the year the tech index has jumped about 19 per cent, making it the biggest force behind the S&P’s record-setting rally. However, the sector has come under pressure of late over concerns about lofty valuations. – Additional reporting: Bloomberg and Reuters