Equities fall on recession warning

MARKETS CLOSED lower across continental Europe yesterday after a choppy session, as fears of a recession in the region unnerved investors.

Market confidence was boosted in early trade with the release of better-than-expected German Ifo data. However, a warning from the European Commission that the euro zone would undergo a mild recession “took the sheen off that”, a Dublin trader said.

“Markets sold off about 1 per cent on the back of that headline,” he said.

European indexes then rallied into the close on encouraging US jobs data, but this was not enough to erase earlier losses.

DUBLIN

THE ISEQ moved in lockstep with its European peers for much of the day, but managed to finish in positive territory, up about 4 points at 3,170.70.

Independent News Media jumped 6.5 per cent, or 1.5 cent, to 24.5 cent after Australian-based media group APN News Media, in which INM has a significant stake, issued a trading statement. Although the update missed expectations, brokers said investors were reacting positively to APN’s announcement of expansion plans.

Elsewhere, Bank of Ireland was down just shy of 3 per cent at 13.4 cent after Ulster Bank said trading conditions in the Irish market remain challenging.

LONDON

BRITAIN’S TOP shares rose yesterday as investors welcomed robust corporate earnings newsflow, with Royal Bank of Scotland spearheading an advance in banking stocks after the lender unveiled in-line full-year results.

RBS, up 5.1 per cent, was the second-top blue chip riser, recovering after the previous session’s weakness, as the part-state-owned bank posted an as-expected fourth-quarter loss of nearly £2 billion, hurt by writedowns on assets and restructuring costs.

Peer Lloyds Banking Group, also majority-owned by the British government, rallied 3.3 per cent ahead of its full-year results tomorrow.

Solid earnings gave Capita a lift too, with the outsourcer ahead 4.3 per cent after it unveiled a 6 per cent rise in 2011 profits and said early contract wins and a buoyant sales market make it confident of better growth prospects this year.

The upbeat outlook statement also supported peer Serco, up 3.2 per cent.

The FTSE 100 closed up 21.34 points, or 0.4 per cent, at 5,937.89.

EUROPE

STOCKS IN Europe declined for a third day as the European Commission said the region’s economy will shrink this year, dragged down by Italy and Spain.

Commerzbank AG tumbled 6.6 per cent after saying it would not pay a dividend for 2011 and will ask investors to swap some hybrid instruments for shares. Fiat led a drop among car makers. Swiss Re, the world’s second-biggest reinsurer, gained after raising its shareholder payout.

The Stoxx Europe 600 Index lost 0.2 per cent to 264.08 at the close of trading, after earlier rising as much as 0.4 per cent and falling as much as 0.7 per cent. The gauge has rallied 8 per cent this year as euro area leaders took measures to contain the region’s debt crisis and US economic data topped estimates.

“The European Commission comments remind us that the situation in the euro zone is not good at all,” said Stephane Ekolo, chief European strategist at Market Securities in London.

The 17-nation euro economy will contract 0.3 per cent in 2012, the European Commission said, abandoning a November forecast for a 0.5 per cent growth.

“Although growth has stalled, we are seeing signs of stabilisation in the European economy,” EU Economic and Monetary Commissioner Olli Rehn said in the introduction to the quarterly forecasts yesterday in Brussels.

National benchmark indexes retreated in 12 of the 18 western European markets. Germany’s DAX dropped 0.5 per cent, while France’s CAC 40 was little changed.

US

US STOCKS advanced, erasing an earlier decline for the Standard and Poor’s 500 Index, as Sears rose on plans to raise as much as $770 million while jobless claims and housing data beat estimates.

Sears surged 20 per cent as it plans to sell 11 store sites and separate some smaller-format businesses. KB Home and PulteGroup added at least 4.2 per cent to pace gains in home builders. Vivus nearly doubled after the company’s weight-loss pill Qnexa won the backing of a US advisory panel.

Hewlett-Packard slumped 4.4 per cent as the computer manufacturer’s profit forecast fell short of estimates.

The SP 500 rose 0.4 per cent to 1,363.46 in New York.

International Business Machines, which comprises 12 per cent of the share-price weighted Dow, added 34 points to the index. – (Additional reporting: Reuters/ Bloomberg)