Draghi QE hint boosts European bonds

ECB chief Mario Draghi inspired a surge in European bonds that pushed Germany’s five-year borrowing costs below zero for the first time and sent the yield on Irish ten-year debt to a record low of 1.16 per cent. Mr Draghi was quoted as saying he couldn’t exclude the risk of deflation, fuelling bets officials will soon start buying sovereign debt. The borrowing costs of Belgium and France also declined to levels not seen before.

As weak economic data weighed on European and US equity markets, the Dublin exchange opened trading in 2015 with a whimper. The Iseq gained 0.08 per cent – or 4.13 points – to finish at 5,228.69.

DUBLIN

With post-holiday business not resuming in earnest until Monday, traders said volumes across the board were very low on Friday.

Bid interest in Aer Lingus remains to be settled in 2015 and the airline's stock advanced 3.19 per cent to finish at €2.295. Aer Lingus shareholder Ryanair was virtually unchanged, dropping slightly to close at €9.82.

Index heavyweight CRH gained 0.77 per cent to close the first day's trading of 2015 at €19.69. Smurfit Kappa finished 0.32 per cent higher at €18.59½. Bank of Ireland was 0.96 per cent higher at 31.6 cent.

LONDON

UK stocks dropped in the first trading day of the year after retreating in 2014. The FTSE 100 Index

lost 18.29 points, or 0.3 per cent, to 6,547.8 at the close of trading, after earlier falling as much as 0.9 per cent and gaining as much as 0.6 per cent.

The measure slipped 0.9 per cent in a shortened week after capping 2014 with a 2.7 per cent retreat. The volume of shares on the gauge changing hands was 42 per cent lower than the 30-day average, data compiled by Bloomberg show.

The broader FTSE All-Share Index dropped 0.2 per cent. Royal Bank of Scotland Group plc fell 1.3 per cent after the Times reported the lender may be fined more than £5 billion over its involvement in the sale of toxic mortgage-backed debt in the US.

TUI gained 2.3 per cent for the biggest increase in the FTSE 100.

EUROPE

European stocks declined on the first trading day of the year after completing the smallest annual advance since 1992. The Stoxx Europe 600 Index slid 0.4 per cent to 341.24, paring earlier losses of as much as 0.7 percent.

The gauge had earlier risen as much as 0.6 per cent before falling as a measure of euro zone manufacturing expanded less in December than initially estimated. A measure of energy companies retreated 0.1 per cent after slumping 15 per cent last year, the most among the 19 industry groups in the Stoxx 600.

A final reading of a purchasing managers’ index for euro zone factory output stood at 50.6 in December, London-based Markit Economics said.

The Stoxx 600 extended declines as a report from the Institute for Supply Management showed US manufacturing cooled in December.

NEW YORK

US stocks fell, after the Standard & Poor’s 500 Index surged to unprecedented highs last year, as small-cap shares slid and data showed manufacturing expanded less than forecast.

Weight Watchers International plunged 12 per cent as the Russell 2000 Index lost 1.1 per cent. Apple tumbled 0.9 per cent to pace declines in technology shares.

Range Resources gained 3.8 per cent as energy companies in the S&P 500 reversed an earlier decline of 0.9 per cent.

Trading in S&P 500 companies was 21 percent below the 30-day average.

“Investors are looking for validation that the economy is, in fact, as strong as advertised,” said Peter Sorrentino of Huntington Asset Advisors. “There’s a nagging fear that the market is a bit overpriced for the actual speed of the economy.”