Shares in big Irish companies join in sell-off as UK recession fears mount

The owner of Irish Ferries, ICG, was among one of the largest fallers on the Irish stock market on Monday. Picture: Sam Boal

Irish shares joined in a global stock market sell-off, as investors feared being caught between the fight mounted by central banks to fight inflation and the costs to major companies entailed by higher borrowing costs. 

The major Irish multinationals, including CRH, Paddy Power-owner Flutter, Smurfit Kappa, and Kingspan, which rely on healthy economies around the world to sell their goods, fell by as much as 4%, wiping hundreds of millions of euro from stock market valuations.

Ryanair and Irish Ferries-owner ICG, as well as Dalata, Ireland's largest hotel owner with its Maldron and Clayton chains, also fell by as much as 6% on concerns over a sharp slowdown in consumer spending or looming recession in Britain.                    

Across Europe equities tumbled to their lowest level since March 2021 as investors worried that surging inflation will fuel more aggressive monetary tightening, increasing risks of a recession.

The Stoxx 600 dropped 2.4% by the close in London as travel and leisure, car makers and technology sectors led the declines. 

European stocks have slumped this year amid worries central banks could cause economies to contract as they tighten policy to tame surging prices. 

The Stoxx Europe 600 fell to the lowest in a month last week when the European Central Bank outlined a slightly more aggressive path than economists had foreseen and an unexpectedly hot reading in US consumer prices fuelled bets the US Federal Reserve will have to step up its battle against inflation. 

The index is now down about 17% from its record high. 

Adding to political risks, French president Emmanuel Macron could lose his outright majority in parliament, forcing him to compromise and rely on coalition partners to push forward his ambitious reforms. The Cac-40 index in Paris closed 2.7% lower. 

“Investors are struggling to digest a constant evolution of risks,” said Madison Faller, global strategist at JPMorgan Private Bank. 

“The latest inflation data didn’t provide the signs of peaking price pressures that many were hoping, and the economic data broadly is telling us we are late cycle,” he said. Adding to concerns about growth, the UK economy shrank in April at the sharpest pace in more than a year. 

“The problem for risk assets is that they’re in a conundrum, we’ve got the choice between two bad choices,” said Max Kettner, chief multi-asset strategist at HSBC. 

“Either inflation stays higher for longer, central banks need to do more, and that is detrimental to valuation, which is ultimately bad for risk assets. 

On the other hand, if growth falls by more than expected, then earnings estimates will have to come down.” 

In Britain, Supermarket Sainsbury's dropped to the lowest since November 2020 after Berenberg lowered its price target on the stock and noted the retailer’s exposure to a discretionary-spending squeeze via its Argos business. 

In Germany, property giant TAG Immobilien slumped to the lowest since March 2017 after a double-downgrade at Barclays to underweight from overweight. 

- Irish Examiner and Bloomberg