STOCK MARKETS rose as investors were encouraged by speculation that Germany would adopt a softer line towards a lighter financial aid package for Spain, while corporate earnings were surprisingly strong.
The euro rose to a one-week high against the dollar and four-week high against the yen and sterling as reports suggested Germany may be willing to accept a precautionary credit line for Spain rather than an outright government bailout.
The single currency lost some gains after one source poured cold water on the German perspective of the situation facing Spain.
DUBLIN
THE ISEQ lagged the performance of European markets as Irish shares rose 0.8 per cent compared with gains of more than 1 per cent-plus in the other bourses.
One Dublin trader reported “a reasonably solid day” for Irish shares but again on light trading volumes as investors shunned significant purchases of Irish stocks.
There was little change in the Irish Government’s benchmark 2020 bond despite plans being announced to sell a further €500 million in treasury bills or short-term debt falling due in January in an auction tomorrow.
“You are not going to fund yourself on 13-week bills,” said one trader. “It is a good headline if you’re speaking in the Dáil but technically you are not in the market unless you are issuing five or 10-year bonds.”
Building materials group Kingspan climbed 5 per cent to €8.50 a share. Mining company Kenmare Resources put in an equally good performance, increasing to 49 cent a share as mining giant Rio Tinto rose 2.9 per cent in the UK after reporting an increase in iron-ore output and as base metals climbed on the London market.
Another building materials group, CRH, which accounts for about a quarter of the Irish Stock Exchange, fell 0.2 per cent as figures showed the Polish cement industry was still under pressure.
Packaging group Smurfit Kappa climbed 3.8 per cent to €8.36 after Packaging Corporation of America, the fourth biggest player in the US corrugated and containerboard market, reported a good set of third-quarter results.
Ryanair and Aer Lingus remained relatively flat, while Bank of Ireland climbed 3.2 per cent but still remained below last year’s 10-cent level at which the bank raised capital from investors.
LONDON
BRITAIN’S MAIN share index posted strong gains as investors welcomed the positive German stance towards Spain.
The FTSE 100 closed 1.1 per cent higher after Bloomberg reported that two German lawmakers said the country was “open to Spain seeking a precautionary credit line from Europe’s rescue fund”. One of the sources later said the report had “over-interpreted” his comments.
The comments by Michael Meister, a deputy caucus leader of German chancellor Angela Merkel’s Christian Democratic bloc, and Norbert Barthle, her party’s budget spokesman, signal a reversal of finance minister Wolfgang Schäuble’s opposition to a full sovereign bailout for Spain.
Part-nationalised Lloyds Banking Group led the banks higher with a 6.1 per cent increase as traders said the bank was helped by reports that the British regulator had approved a plan to boost its finances by swapping assets with its insurance division.
Car and aircraft parts maker GKN fell 3.4 per cent.
EUROPE
POSSIBLE GERMANY approval for a bailout-lite package for Spain and stronger-than-expected confidence among German investors sent European shares higher.
French bank BNP Paribas and German lender Deutsche Bank led the pace on gains among banking shares. The Stoxx Europe 600 index climbed 1.3 per cent, the first time the benchmark gauge has risen for two straight days since September 12th.
A gauge of banking shares was the best performing group among 19 industries in the Stoxx 600. BNP Paribas rose 4.3 per cent, Deutsche Bank 5.1 per cent and Banco Santander 4.3 per cent.
UBS added 3 per cent after chief financial officer Tom Naratil said the Swiss bank fired as many as 550 employees after suffering a $2.3 billion loss from unauthorized trading last year.
German investor sentiment improved for a second month in October. The ZEW Centre for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, rose again for October.
NEW YORK
STOCKS ROSE after stronger-than-expected earnings from big-name companies, including Johnson Johnson and Goldman Sachs, which posted a profit as revenue more than doubled. Citigroup’s shares rose 0.9 per cent after the bank unexpectedly announced that chief executive Vikram Pandit had resigned effective immediately, along with chief operating officer John Havens. – (Additional reporting - wires)
