The Irish market closed relatively flat today, as gains in the banking sector were offset by declines in some high profile stocks.
Trading volumes were relatively low outside of Bank of Ireland, which put in a “stellar performance,” according to one analyst. It closed up 6.23 per cent with 57 million shares traded. According to Ronan Hurley of Davy, investors are looking at the bank with a fresh pair of eyes, and considering them on an earnings basis rather than on price to book.
Ryanair was down 2.27 per cent with analysts saying investors are continuing to review both Ryanair and its main rival EasyJet’s latest results. EasyJet last week warned that the timing of Easter would likely affect its first-half earnings.
Paddy Power followed other European gaming firms down as markets continually to worry about proposed legislative changes being considered by the UK government. It closed down 0.25 per cent with 93,000 shares traded.
Packaging group Smurfit was also lower despite a positive reaction following the publication of US peer Rock Tenn first quarter results earlier this week, which highlighted maintenance downtime for the company. Smurfit closed down 1.43 per cent
European shares fell to six-week lows today, breaking below technical support levels in the face of weak earnings and concerns that another trimming of US monetary stimulus may exacerbate the emerging markets rout.
Emerging economies - key revenue sources for Europe’s car makers, fund managers and other companies - have been hit by financial market turbulence in recent days, triggered by regional problems and by the prospect of another $10 billion cut in the US Federal Reserve’s bond purchases.
Analysts say the Fed’s decision after a monetary policy meeting, due at 1900 GMT, could expose the weakness in some emerging countries’ finances as foreign cash moves out and local borrowing costs rise.
That, in turn, would eat into the revenues of global companies exposed to emerging markets to the detriment of indexes such as the EuroSTOXX 50, whose constituents make around a third of their sales in emerging markets.
“If the Fed takes another $10 billion out of QE ... (EM currencies) will probably end up weakening further,” Nick Xanders, who heads up European equity strategy at BTIG, said.
“For the last three years, investors have thought that they’ve put the glass slipper on Cinderella, but actually, when the QE is taken away, you realise it’s the ugly stepsister.”
The EuroSTOXX 50 closed down 0.9 per cent at 3,011.45 points , its lowest finish since mid-December.
The move took the index below a key technical support of the 100-day moving average, last at 3,014.08 points, which had acted as a floor for the market earlier this week.
Among the top regional fallers, the German DAX fell 0.8 per cent, slipping below its 50-day moving average.
“Technically, at least in the DAX, we are through support at 9,350, so we have to accept that we are still in a correction ... and the reason might be some further worrying about the possible Fed decision and the emerging markets too,” said Oliver Roth, head trader at Close Brothers Seydler.
Underscoring the emerging market risks for European companies, Fiat said results were hit by a slowdown in Latin America. Shares in the carmaker, which also cut its 2014 trading profit forecast, dropped 4.1 per cent, among the top fallers on the broad FTSEurofirst 300. (Additional reporting - Reuters)
