European shares reversed early morning gains and fell to two-week lows on Thursday in a broad-based sell-off of shares as British prime minister Theresa May’s government was plunged into crisis over Brexit.
Sterling tumbled, while the Brexit-sensitive Dublin market suffered its worst daily decline since 2016.
The Iseq was weak across the board, though one Dublin trader noted that the declines were unsurprising in the context of the chaotic developments in Westminster.
Dublin
The Iseq index slumped 3.8 per cent, the worst performance in western Europe, amid rising concerns that the UK will crash out of the EU without a deal. Bank of Ireland and Ryanair were two of the biggest fallers on the day, as any stock with exposure to the UK was hit.
The Dublin market was down about 2.2 per cent at lunchtime, with the afternoon providing no respite. Bank of Ireland ended 7.9 per cent lower at €5.97, underperforming financial stocks on a poor day for the sector.
Ryanair plunged 6.6 per cent to €11.77 as Brexit fears took its toll on travel and leisure stocks.
CRH was another key faller, dropping 4 per cent to €24.73, after broker Exane BNP Paribas downgraded its recommendation on the stock to "neutral", highlighting its exposure to US weather conditions. Davy Research also lowered its full-year earnings forecast for the building materials group.
Cairn Homes declined 5.7 per cent to €1.30, while Dalata Hotel Group ended 3.8 per cent lower at €5.04.
Swiss-Irish bakery group Aryzta also endured another steep descent, closing down 9.5 per cent as it completed its rights offer, which resulted in a 97.4 per cent take-up.
London
The resignation of ministers including Brexit secretary Dominic Raab triggered a retreat among banks and housebuilders.
The pound’s fall gave an edge to British exporters and blue-chips with revenues in foreign currencies, with the result that the FTSE 100 index ended the day with a 0.06 per cent gain. The more domestically focused FTSE 250, however, fell 1.3 per cent.
Among banks, RBS's stock closed down 9.6 per cent, its steepest dive since the Brexit referendum itself in June 2016. Lloyds's shares dropped 5 per cent and Barclays stock slipped 4 per cent.
The sea of red for UK banks came as Reuters reported that Bank of England and other regulators discussed the pound’s plunge and other market turmoil with about 10 financial institutions based in London.
Housebuilders Persimmon, Taylor Wimpey and Barratt Developments all declined more than 7 per cent.
Easyjet declined 6.6 per cent, the same drop suffered by Ryanair, as airlines had a bad day.
Europe
The Stoxx Europe 600 index declined 1.1 per cent to the lowest in more than two weeks. German, Spanish and French markets all ended in negative territory as Brexit nervousness had a spillover effect across Europe. In Frankfurt, the Dax ended 0.5 per cent lower, while the Cac 40 in Paris was down 0.7 per cent.
Top-rated German government bond yields tumbled to over two-week lows amid the political chaos in London, while borrowing costs in Spain, Italy and Portugal all faced upward pressure as investors stayed away from riskier assets after the developments in Britain injected fresh uncertainty into world markets.
US
Wall Street stocks edged higher, reversing an earlier wipe-out that briefly erased gains for the year, as the biggest tech stocks climbed.
Rallies in hardware makers including Apple and Cisco Systems led the Nasdaq higher. Retailers dragged after JC Penney and Dillard's posted disappointing numbers, while California utility PG&E tumbled, gripped by a crisis over whether its equipment set off a deadly wildfire.
Facebook fell 1.5 per cent after the New York Times reported that its most senior executives ignored and then sought to conceal signs that its platform could be exploited to disrupt elections and broadcast propaganda. – Additional reporting: Bloomberg / Reuters
