Iseq bucks trend as world stocks rally

Stocks on world markets edged higher on low volumes yesterday, while Spanish bond yields rose to a euro-era high, as scepticism about a €100bn bailout for Spain’s banks scared investors ahead of elections in Greece on Sunday.

Irish shares bucked the trend with the Iseq closing down almost 0.5% at 3,029.36 with Ryanair, Glanbia, Bank of Ireland and CPL all down in trading.

Spanish government bond yields hit their highest since the euro was launched in 1999 on concern over how difficult it may be for Madrid to access debt markets in the longer term and as current holders of Spanish debt fear their claims for repayment will be subordinated to EU claims after the bank bailout.

Italian yields also rose as attention turned to the state of Rome’s finances, with Austria’s finance minister saying Italy may need a financial rescue because of its high borrowing costs.

The statement drew a furious rebuke from the Italian prime minister.

Concerns that the Greek election on Jun 17 would bring to power parties opposed to its current bailout plan and force a disorderly exit from the eurozone were rekindled by a report that EU officials were considering ways to manage the fallout.

The euro was little changed for the day versus the greenback, around $1.2475, after a slump on Monday.

“Investors will likely continue to sell the euro into strength, especially with Greek elections on Sunday and a EU summit next week, which should be heavy in headlines,” Camilla Sutton, chief currency strategist at Scotia Capital said. “Any euro rally should prove short-lived.”

The growing impact of the eurozone crisis on the economic outlook was underlined by data showing a surprise fall in British manufacturing output in April.

Wall Street stocks were up led by energy stocks as US crude oil recovered some ground.

“There’s no real negative US economic news and everything coming out of Europe we already know about,” said Ken Polcari, managing director at ICAP Equities in New York.

MSCI’s world equity index rose 0.3% and the eurozone’s blue-chip Euro STOXX 50 index closed up 0.27%.

The Dow Jones industrial average was up 94.53 points, or 0.76%, to 12,505.76 at midday.

The S&P 500 Index gained 7.78 points, or 0.59%, to 1,316.71. The Nasdaq Composite added 19.38 points, or 0.69%, to 2,829.11. Global growth concerns also pushed Brent crude oil prices down 1% to $97.03 a barrel.

US oil was up 0.3% at $82.97 a barrel after hitting a one-year low at $81.07.

Reuters