Investors ignore S&P downgrade

INVESTORS IN Europe shrugged off Standard and Poor’s much-anticipated downgrading of nine euro zone countries, as stock markets in Europe swung into positive territory from mid-morning.

There were no hiccups at an auction of French debt, as France’s borrowing costs fell. French bonds gained as the country auctioned €1.895 billion in one-year securities at a yield of 0.406 per cent, compared to 0.454 per cent at a sale of similar-maturity securities earlier this month. The European Central Bank was also active in the bond market yetsterday, buying Italian and Spanish government debt.

Having earlier downplayed the Standard and Poor’s move, the Sarkozy administration also received a boost from ratings agency Moody’s yesterday, which announced it had decided to retain its triple-A rating on French sovereign debt.

Meanwhile, in a speech in Paris, French central bank governor Christian Noyer said Standard and Poor’s decision to strip France and Austria of their triple-A status and downgrade an additional seven euro zone countries late on Friday evening was an “additional challenge” for the region, but that the 17 member states that share the single currency have the “right strategy” for tackling the debt crisis.

The euro hit a near 17-month low against the dollar and an 11-year low against the yen in early tradeover that the mass downgrades would damage the lending capacity of the euro zone’s bailout fund.However, it recovered its early losses, with some of the gains attributed to speculators taking profits on their short positions on the currency.

DUBLIN

The Iseq index closed up 0.2 per cent after a relatively flat finish for markets across Europe.

Cement maker CRH climbed 0.6 per cent to €15.08, despite news of an impairment taken by its building materials peer Holcim, while paper and packaging group Smurfit Kappa advanced 1 per cent to €5.11, albeit on tiny volume.

A trading statement from industrial holdings group DCC noted that a “prolonged period of exceptionally mild weather” in the early part of the winter had weakened demand in its energy business, the largest division in the company.

Combined with a difficult economic background and high oil prices, this is likely to continue to impact on both volumes and margins for energy products in the current quarter, the company said. The stock fell 1.4 per cent to €18.15.

Other fallers included food group Greencore, which declined 1.8 per cent to 61 cent, while Kerry fell back 1.6 per cent to €27.53. Bookmaker Paddy Power also went into reverse, closing down 1.4 per cent at €42.10.

LONDON

The FTSE 100 rose 0.4 per cent yesterday after stocks recovered from their early lost ground.

Among the most-watched stocks in London trading was Carnival Corporation, owner of the grounded ship the Costa Concordia, which fell the most in more than 10 years after it said the incident – which killed at least six people off Italy’s Tuscan coast – would cost the company as much as £62 million (€75 million). The Miami- and London-based Carnival, which is the world’s biggest cruise operator with brands including Cunard and Princess Cruises, fell 16 per cent to £18.78.

Elsewhere, Pearson Plc, the owner of the Financial Times, climbed 2.7 per cent to £12.50 after analysts at UBS issued a note advising investors to buy the shares, citing a possible benefit to the company if Apple takes steps to widen the use of technology in the education market, in which Pearson is involved.

EUROPE

France’s CAC 40 Index jumped 0.9 per cent and Germany’s DAX Index gained 1.3 per cent, with the Stoxx Europe 600 Index advancing 0.8 per cent.

Among west European markets, only Spain and Portugal finished in the red. Fiat and Daimler led a rally in carmakers after Goldman Sachs reiterated that the industry was currently “attractive” to investors.

Fiat surged 7 per cent to €4.16 euro, Pirelli climbed 4.9 per cent to €6.92, Daimler advanced 3.6 per cent to €39.35 and Renault rose 2.9 per cent to €30.87.

Holcim lost 1.6 per cent to 51 Swiss francs.

The world’s second-largest cement maker said it will book a 775 million- franc ($812 million) charge in the fourth quarter after writing off investments in South Africa and revaluing assets in sluggish markets from Spain to the US

Lundin Petroleum sank 14 per cent to 152.10 kronor after the company said it will probably reduce its estimates for the recoverable resources at the Avaldsnes discovery.

US

Stock markets in the US were closed for the Martin Luther King Jr holiday yesterday, and reopen again today. Citigroup and Microsoft are among the US companies due to report quarterly results this week. – (Additional reporting Bloomberg/Reuters)