Shares rise on hopes of US fiscal deadlock breakthough

A possible ending to the deadlock in Washington lifted shares in both Europe and the US tonight. The Iseq closed the day up 1.6 per cent on the preceding day as Dublin joined other markets in welcoming rumours of a breakthrough in negotiations.

DUBLIN
Shares in Grafton Group, which has a strong English presence, rose 7 per cent to €7 after the UK Builders Merchants Federation's monthly sales figures highlighted improved conditions. Shares in building material groups CRH rose 4.2 per cent to €17.72. Insurer FBD Holdings were 5.1 per cent higher at €14.25, while C&C Group declined for the second day in a row, down 1.5 per cent to €4.22.

LONDON
Britain's top share index bounced off three-month lows early yesterday as signs of progress on ending the fiscal stalemate in Washington buoyed sentiment, with banks in particular leading the index higher. The FTSE 100 closed up nearly 1.5 per cent, with 96 per cent of stocks in positive territory on its strongest day since early July.

There were gains across the board, with high-profile risers including the owner of British Airways, International Airlines Group, following an improvement of 11.9p to 338.6p, while insurer Prudential was up 39p to 1177p.

The Bank of England’s decision to keep interest rates at a record low and maintain its quantitative easing programme at £375 billion came as little surprise, but households were still feeling pain after SSE said that gas and electricity tariffs would rise by an average 8.2 per cent from mid-November.

SSE shares rose by 1.5 per cent at one point before closing down 5p at 1449p. British Gas rival Centrica was 1.8p higher at 362.6p on expectations it will follow suit in the coming days.

Housebuilder Persimmon was the biggest riser amid forecasts that it will reap the benefit of the British government's extended help-to-buy housing scheme. Shares rose another 5.7 per cent, having climbed by 5 per cent on Wednesday.

It was joined high up the risers board by Costa and Premier Inn company Whitbread, which rose 122p to 3114p ahead of interim results later this month and fresh speculation of a break-up of the group.

In a strong session for shares in the leisure sector, Frankie & Benny's owner Restaurant Group rose 27p to 545p.

EUROPE
European stocks rose the most in more than five weeks amid signs of an end to the stalemate in Washington. The Stoxx Europe 600 added 1.7 per cent to its highest level since September 2nd. The benchmark gauge had declined for a third day on Wednesday amid concern that the impasse might lead to a default.

The VStoxx Index, which measures the volatility that options traders expect in the Euro Stoxx 50 Index, tumbled 15 per cent, the most in 13 months.

France’s CAC 40 jumped 2.2 per cent and Germany’s DAX climbed 2 per cent. Spain’s Ibex 35 surged 2.4 per cent to its highest level since July 2011.

A gauge of bank shares in the Stoxx 600 rallied 2.5 per cent. Commerzbank added 5.9 per cent to €9.36. Banco Popolare rallied 1 per cent to €1.40, while Intesa Sanpaolo jumped 2.2 per cent to €1.78.

NEW YORK
US stocks rallied with major stock indexes up nearly 2 per cent in early trading on signs of progress in negotiations to raise the US debt limit just a week before a deadline.

The CBOE Volatility index VIX, often used to measure the level of investor anxiety, plunged more than 15 per cent to 16.65, back near levels before the US government shutdown.

Best Buy shares jumped 7 per cent in heavy volume early yesterday following the announcement that the electronics retailer is about to launch a trade-in promotion programme where customers can swap an old smartphone for a gift card that can be used to buy the new Apple iPhone 5S and 5C. – Additional reporting: Bloomberg, Reuters