European values rebound from Putin threat as investors eye Federal Reserve

European shares closed higher on Wednesday, rallying from losses earlier in the day as investors shrugged off Russian president Vladimir Putin’s announcement of a partial military mobilisation following seven months of war in Ukraine and made a thinly veiled threat concerning nuclear weapons.

The pan-European Stoxx 600 index ended the session 0.9 per cent higher, as the market positioned itself ahead of an expected US Federal Reserve rate hike.

The Fed was seen raising its benchmark lending rate by 0.75 of a percentage point within hours of European trading drawing to a close, continuing its aggressive fight against persistently high inflation.

DUBLIN

The Iseq overall index edged 0.2 per cent higher to 6,740.16. Bank of Ireland closed 2.1 per cent higher to €7.32, with Minister for Finance Paschal Donohoe saying on Wednesday that he expects to announce soon that the State’s stake has fallen to zero.

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AIB shed 1.1 pe cent to €7.32. The Minister signalled that he plans to resume selling of AIB shares from the end of this month.

Budget 2023: What to expect

Listen | 51:50

In part one of today's podcast, Jack Horgan-Jones and Cliff Taylor discuss next week's budget when the government is expected to deliver a huge package of relief for households as well as the usual adjustments to taxes and new fiscal initiatives. In part two: Once again, the tourism sector will be hoping for an extension to the 9% VAT rate that was brought in to help businesses survive the pandemic. But there are indications the rate, which was extended by six months earlier this year, will not be extended again. Eoghan O'Mara Walsh is Chief Executive of the Irish Tourism Industry Confederation and he tells Ciaran why the rate should stay and how the sector is faring.

Cairn Homes rose 2.8 per cent to 95 cent, while Glenveagh Properties added 4.2 per cent to €1.02, piggybacking strong demand for housebuilders in the UK on speculation that British prime minister Liz Truss’s government will cut stamp duty there in a mini-budget on Friday.

LONDON

The UK’s benchmark FTSE 100 dipped 0.2 per cent. Banks slipped 0.7 per cent while consumer staples such as Diageo and Unilever fell 0.8 per cent and 0.5 per cent, respectively, and weighed most on the benchmark index.

Capping losses on the commodity-heavy index, oil majors BP and Shell climbed 0.7 per cent and 1 per cent, respectively, as crude prices rose on supply concerns.

Financial markets expect the Bank of England to follow the Fed with a 0.75 point increase in rates to 2.5 per cent.

Shares of BAE Systems gained 3.7 per cent, tracking upbeat defence peers in Europe, after Mr Putin ordered Moscow’s first military mobilisation since the seccond World War.

EUROPE

Russia’s military mobilisation amplified concerns over the conflict that has raised the possibility of power rationing and potential blackouts during the winter after Russia abruptly turned off the taps on a main natural gas pipeline to Europe.

Germany confirmed the nationalisation of Uniper, the country’s largest importer of Russian gas, as it scrambles to secure non-Russian sources of power. The gas importer’s shares were down 25.3 per cent.

Germany will now inject yet more cash, partly by buying out Finnish utility Fortum’s 56 per cent holding for €500 million. Fortum shares surged 9.5 per cent.

Energy stocks rose 1.6 per cent as oil prices climbed following the news of mobilisation.

NEW YORK

Wall Street shares were ahead in early afternoon trading, ahead of the Federal Reserve announcement, with investors waiting, in particular, for cues on the length and depth of further policy tightening to tame surging price pressures.

Updated economic projections from policymakers will be in focus, as investors would like to gauge where interest rates are headed, how long it would take inflation to fall and the pain rising prices are inflicting on the US economy.

Meanwhile, shares of US defence companies Northrop Grumman, Raytheon Technologies and Lockheed Martin rose each as investors monitored developments in Russia and Ukraine.

Coty gained after the CoverGirl cosmetics maker raised its first-quarter 2023 revenue and gross margin forecasts on stronger demand for beauty products.

General Mills jumped after the Cheerios cereal maker raised full-year sales and profit outlook, banking on higher prices and resilient demand for its breakfast cereals, snack bars and pet food.

- Additional reporting, Reuters