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Italian politics and weak banks weigh on European shares

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European shares dipped on Wednesday as strong results from Adidas and robust mining stocks were more than offset by weak banks and a drop in Italian stocks over fresh political jitters. Italy’s FTSE MIB index fell 1.1 per cent, turning lower after right-wing leader and aspiring prime minister Matteo Salvini reiterated his party’s view that the euro was a flawed currency.

He also said he was open to forming any sort of coalition government as long as it did not include the Democratic Party. His remarks, which brought the focus back to Italy’s inconclusive election outcome, hit Italian government bonds and sent the country’s banking stocks, which are seen as a proxy for political risk given their big sovereign bond holdings, down 1.4 per cent.

DUBLIN

Permanent TSB closed up only 0.5 per cent at €1.95 after signalling a return to profitability for the first time since the crash. The stock had, however, opened 4 per cent down and rallied to close up on the day. Rivals AIB and Bank of Ireland remained weak along with other European financials, both down 0.2 per cent, at €4.80 and €7.25 respectively.

Ireland’s largest hotel group Dalata continued its climb towards €7, increasing 3 per cent to €6.44.

As the showpiece of the jumps calendar took place in Cheltenham, Paddy Power Betfair rose 1.6 per cent to €87.70.

Ryanair, meanwhile, underperformed the airline sector, closing 1 per cent down at €16.07. The three Iseq-listed property Reits – Hibernia, Ires and Green – all fell despite another upturn in house prices. They ended the day down up 1.3 per cent, 0.7 per cent and 2.8 per cent respectively. One trader said the companies may have been anchored by negative sentiment in the UK.

LONDON

British shares gave up early gains and finished in negative territory on Wednesday as points gained by Prudential and mining stocks were overturned by simmering fears of a global trade war that pushed Wall Street into the red.

The blue-chip FTSE 100 index closed down 0.09 per cent at 7,132.69 points, slightly above the pan-European Stoxx 600, down 0.15 per cent while the Dow Jones Industrial Average was losing about 1 per cent at the same time. “The positive mood in Europe has waned after US markets turned lower,” David Madden from CMC Markets said. The showdown between Britain and the Kremlin about how a Soviet-era nerve toxin was used to attack a Russian ex-spy had little impact on British shares. Insurer Prudential was the top gainer, its shares rising 5.1 per cent after it said it would demerge its UK and Europe retirement and asset-management business from its international insurance business. It said it planned to demerge M&G Prudential into a separate company with a premium listing on the London Stock Exchange.

Shares in Glencore were up 1.8 per cent, Anglo American added 3.3 per cent and Antofagasta rose 3.4 per cent. Results were also in focus. Despite an early rise, shares in Morrison’s gave up gains and posted the worst performance of the index, down 4.8 per cent after the supermarket gave a full-year update amid a tough environment for food retailers due to competition in pricing and online.

EUROPE

Europe’s banking index fell 1 per cent. The Stoxx 600, however, managed to limit losses to 0.2 per cent, also weighed by early losses on Wall Street, while Germany’s Dax added 0.1 per cent, lifted by a double-digit gain in German sports fashion company Adidas. Its shares jumped 11.2 per cent after the company announced a share buyback of up to €3 billion and lifted its 2020 profitability target.

Technology stocks weighed on the Stoxx after sources said US president Donald Trump was threatening to impose tariffs on up to $60 billion of Chinese imports, targeting tech and telecommunications in particular.

Zara owner Inditex rose 3.8 per cent, reversing earlier losses as investors cheered strong online sales growth and chief executive Pablo Isla said margins should hold up this year. The stock initially fell after the company released results and proposed a lower-than-expected dividend German chemicals firm Symrise tumbled 5.2 per cent after 2017 results disappointed the market with slow margin growth. Peer Brenntag also dropped after results.

NEW YORK

The Dow Jones Industrial Average fell more than 250 points, or 1 per cent, on Wednesday as industrial stocks tumbled over growing fears of a trade war with China after President Donald Trump sought to impose fresh tariffs. Trump is looking to levy tariffs on up to $60 billion of Chinese imports, targeting the technology, telecom and apparel sectors, sources told Reuters on Tuesday.

Also weighing on sentiment was data that showed US retail sales fell for a third straight month in February, pointing to a slowdown in economic growth in the first quarter. But the data helped cool concerns of the Federal Reserve raising interest rates at a faster pace in 2018. Financial stocks fell 0.7 per cent, tracking a decline in US bond yields.

Among stocks, Signet Jewelers fell more than 18 per cent after the company gave a disappointing full-year earnings forecast. Qualcomm fell about 2 per cent after Broadcom formally withdrew its bid. Broadcom shares dipped 0.9 per cent. Among gainers, Ford rose 3.5 per cent after Morgan Stanley double-upgraded the stock to “overweight” and raised its earnings estimate on the automaker.

Additional reporting: Reuters

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