AIB shares turn volatile on talk of further State sale

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European markets generally managed to take the fall-out from Italian elections in their stride on Monday, with AIB coming into focus in late trading in Dublin as Minister for Finance Paschal Donohoe reignited speculation of a further sell-down of the State’s stake in the lender.

The pan-European Stoxx 600 index edged 1 per cent higher to 370.87, recovering from a sell-off on Friday after US president Donald Trump unveiled plans to impose tariffs on aluminium and steel imports.

However, Italy’s FTSE MIB fell by 0.4 per cent on Monday and the yield on Italian bonds jumped after Italian elections over the weekend delivered a surge in support for anti-establishment parties and hung parliament.

The Iseq index also underperformed – 0.9 per cent to 6,611.86 – amid reignited concerns about Brexit and as the euro held onto most of its gains against sterling last week.

“Political risk has returned to markets in the last week, as Trump’s Tariffs, the Italian election and Brexit negotiations are all thrown into the mix,” said Garret Grogan, global head of trading at Bank of Ireland Global markets. “For the Irish economy, continued euro strength will act as a drag on the Irish export and tourism sector.”

AIB shares turned volatile in late trading, as investors digested Mr Donohoe’s comments to Bloomberg Television that the State is “constantly monitoring” potential for a further share sale in the bank.

Taxpayers continue to own 71 per cent of AIB after it re-floated on the main Dublin and London markets last June and investors would see a further share sale as a positive development, giving management greater control over the company’s future. While the stock rallied as much as 1.4 per cent at one stage, they closed down 0.4 per cent at €5.27. Any share sale would likely take place at a discount to the prevailing market price.

Elsewhere, Cairn Homes fell 4.6 per cent to €1.70 as traders positioned themselves ahead of the company’s full-year results on Tuesday.

News that Paddy Power Betfair’s chief financial officer Alex Gersh is stepping down sent its stock down 2.7 per cent to €92.75.

The FTSE 100 index gained 0.7 per cent to 7,115.98, thanks to gains among mining companies and commodity stocks which had been among the worst hit after US President Trump threatened higher tariffs on steel and aluminium imports.

Shares in Royal Dutch Shell rose 0.8 per cent while BP gained 1.3 per cent. Miners Rio Tinto and BHP Billiton gained more than 1 per cent.

Among the biggest gainers were housebuilding stocks, after UK Prime Minister Theresa May announced a draft policy to overhaul planning laws in a bid to free up more land for housebuilding to ease the country’s housing shortage. Bovis Homes gained 4.5 per cent, and Persimmon rose 2.2 per cent.

Europe’s second-largest insurer AXA however slumped 9.7 per cent after it agreed to buy Bermuda-based XL Group for around $15 billion.

Shares of silicon wafer group Siltronic surged 7.6 per cent after the Munich-based firm reported its latest figures, saying that it was forecasting a highly-positive 2018 fiscal year.

Carmakers came under pressure during the session, after Mr Trump threatened European car-makers over the weekend with a tax on imports if the EU moved to retaliate over his plan to impose a tariff on steel and aluminum imports.

US stocks rose as investors speculated that Mr Trump’s tough tariff talk won’t translate into the most severe protectionist policies.

The in early afternoon trading, the Dow Jones Industrial Average was up 0.3 per cent, while the S&P 500 Index added 0.4 per cent and the Nasdaq Composite rose 0.3 per cent.

Shares of Clearside Biomedical jumped after the drug developer’s eye drug met the main goal in a late-stage study, while Dermira plunged after the company abandoned its acne drug.

Shares in chipmaker Qualcomm dipped after the US Committee on Foreign Investment ordered the company to postpone an annual shareholder meeting, giving it more time to resist efforts by Broadcom Ltd to force through a $117 billion merger.

-Additional reporting, Bloomberg, Reuters

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