Sterling drop weighs on Iseq as European shares advance

The Iseq index stood out as a weak spot across European markets on Friday as a drop in the value of sterling against the euro as a result of weaker-than-expected UK economic figures weighed on sentiment.

The Iseq index fell 0.2 per cent to 6,798.38 points, resulting in a 0.4 per cent decline for the week. However, the pan-European Stoxx index climbed 0.2 per cent.

DUBLIN

A 1 per cent drop in the value of sterling to 87.8p against the euro, on news the UK economy slowed more sharply than expected in the first three months of the year, served to push C&C down 0.9 per cent to €3.17, while Ryanair lost 0.7 per cent to €15.34.

Permanent TSB declined 1.6 per cent to €1.75 as investors digest an uninspiring set of results from Ulster Bank, whose profits fell by 66 per cent in the first quarter as the bank set aside additional provisions for bad loans.

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Bucking the trend, Paddy Power Betfair gained 1.1 per cent to €81.20, recovering from weakness earlier in the week, while Kingspan Group added 1.1 per cent to €37.60.

LONDON

Sterling’s fall against other major currencies boosted multinational dollar-earners on the FTSE 100, helping it jump 1 per cent to its highest since February 1st, just before a rolling global sell-off spread across markets.

UK-listed consumer staples stocks, which overwhelmingly make earnings in dollars and translate them back into sterling, all made gains as the pound fell.

Diageo, Unilever, British American Tobacco and Imperial Brands all rose 1.6 per cent to 2.9 per cent, the biggest boosts to the FTSE. Burberry gained 3.1 per cent.

Results dominated trading, with RBS down 1.6 per cent and among the worst-performing European bank, even though the bank reported much stronger than expected pre-tax profit of £792 million (€901 million) in the first quarter.

However, investors are still awaiting the outcome of the US department of justice’s investigation into alleged historical US residential mortgage-backed securities mis-selling, analysts said, also noting a deterioration in net promoter scores.

EUROPE

Well-received results from Spanish banks and a recovery among tech stocks lifted European shares to a fifth straight week of gains on Friday, its longest winning streak since September.

Spain's BBVA rose 2.4 per cent and Caixabank gained 1.7 per cent. Both banks beat profit forecasts thanks to strength in their overseas markets.

Finnish biofuel producer and oil refiner Neste rose 10.2 per cent after increasing guidance on margins and operating results following a strong first-quarter.

Satellite firm SES jumped 9.9 per cent after strong growth in its networks division helped it beat first-quarter expectations.

Tech stocks rose 0.8 per cent following well-received results from Facebook, Amazon, Microsoft and US chipmakers.

French pharmaceutical group Sanofi lost 1.7 per cent after reporting sluggish first-quarter profit growth. It blamed a stronger euro and lower sales at its diabetes unit.

NEW YORK

Wall Street moved to a defensive mode on Friday, shifting into safer equity sectors as economic data raised the spectre of inflation and possible interest rate hikes, while technology shares pulled back after an initial surge.

US gross domestic product increased at a 2.3 per cent annualised pace in the first quarter, slower than the prior quarter but stronger than the expected 2 per cent growth.

The signs of inflation come as bellwether companies have recently cautioned that higher costs could erode margins, warnings that investors clung on to, rather than reports that showed first-quarter corporate profit growth was the strongest in seven years.

Still, Microsoft and Intel jumped, both to record highs after they topped profit forecasts. Amazon.com also surged to a record high after surprisingly strong quarterly results.

During early afternoon trading, the Dow Jones Industrial Average was down 0.2 per cent, at 24,286.74, the S&P 500 was up 0.1 per cent, and the Nasdaq Composite was up 0.1 per cent.

– Additional reporting, Bloomberg, Reuters