Sharp decline in US as Fed forecast’s fewer interest-rate increases

European shares rose cautiously yesterday with gains in most sectors lifting the market amid speculation the US Federal Reserve would signal a conciliatory stance towards monetary measures. The Iseq in Dublin was up 0.4 per cent on moderate trading levels.

US stocks, however, declined sharply after the Fed’s forecast of fewer interest-rate increases in 2019 fell short of investors’ hopes of a more dovish monetary policy

DUBLIN

Bank of Ireland finished up 3.1 per cent at €5.16, on general optimism throughout the European banking sector on hopes that the financial system would be shored up by the prospects of economic calm in Italy.

Dalata Hotel Group rose 5.5 per cent to €4.78, after data emerged showing strong growth in the Dublin hotel sector was undiminished by an increase in capacity.

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Financial group IFG slipped 3.2 per cent to €1.50 after Goodbody adjusted its forecasts for the company.

LONDON

The FTSE 100 closed 1 per cent higher and the FTSE 250 added 0.6 per cent. The biggest winner was GlaxoSmithKline, which was up 3.8 per cent after it announced a joint venture with Pfizer's consumer health division and said it planned to split into two businesses – one for prescription drugs and vaccines, the other for over-the-counter products.

Copper rose on hopes the US central bank would slow the pace of interest rate rises, leading to miners Rio Tinto, Glencore, BHP and Anglo American rising more than 2 per cent.

Just Eat rose 1.9 per cent as Liberum analysts expressed confidence in the takeaway group's strategy .

EUROPE

Worries about slowing growth in China and Europe were exposed by the decision of FedEx to slash its 2019 forecast. The move sent jitters across European package delivery companies with Deutsche Post shares sliding 4.2 per cent and Royal Mail in the UK retreating 2.4 per cent.

Italian banks jumped 2.1 per cent after the European Commission reached a deal with Italy over its 2019 budget, avoiding disciplinary steps against Rome and ending months of verbal sparring. As a result, the Milan bourse led European stocks markets with a 1.6 per cent rise. There were more limited gains for Paris and Frankfurt which gained 0.5 and 0.2 per cent respectively.

There was also bad news for euro zone banks which have lost close to a third of their market value so far in 2018. Shares in French bank Natixis sank 6.3 per cent after it booked €260 million of losses and provisions on Asian derivatives. Austrian lenders Erste Bank and Raiffeisen Bank fell 6.7 per cent and 4.6 per cent respectively as analysts argued their earnings would take a hit.

NEW YORK

Global equity markets gave up earlier gains and continued a week-long sell-off after the US Federal Reserve announced a fresh interest rate hike and said “some” further rate hikes would be necessary in the year ahead.

The decision slashed more than 700 points off of the Dow and sent MSCI’s index of global stocks down nearly 0.9 per cent for the day. The index is down nearly 13 per cent since the start of December due to concerns that global economic growth is slowing.

“This is clearly a disappointment for those hoping for a dovish rate hike,” said David Joy, chief market strategist at Ameriprise Financial in Boston. “It is a more moderate rate hike but it is a rate hike and there is still a gap between where the Fed is and where the market is in terms of policy expectations for next year.”

On Wall Street, the Dow fell 351.98 points, or 1.49 per cent, to 23,323.66, the S&P 500 lost 39.2 points, or 1.54 per cent, to 2,506.96 and the Nasdaq dropped 147.08 points, or 2.17 per cent, to 6,636.83.

– (Additional reporting: Reuters)