Business

European shares slip as investors parse inflation data

Stoxx 600 notches first monthly loss in six even as data signals improving economic fundamentals

Wall Street’s main indexes fell on Tuesday, with caution prevailing ahead of the Federal Reserve’s interest-rate decision. Photograph: Michael M Santiago/Getty Images

Eoin Burke-Kennedy
Tue Apr 30 2024 - 18:24

European shares closed lower on Tuesday, weighed by a bleak raft of earnings reports from the region’s top carmakers. The continentwide Stoxx 600 stocks index slipped 0.6 per cent, bogged down by a 4.3 per cent loss in the automobile sector, the sector’s biggest drop since September 2022.

Volkswagen, Mercedes-Benz and Stellantis tumbled between 4 per cent and 10 per cent after posting lower sales and first-quarter revenue as they geared up to launch new models, faced higher costs and were hit by weaker demand for new cars.

On the mergers and acquisitions front, BBVA dropped 6.6 per cent after Spain’s second biggest lender and smaller rival Sabadell said they had started negotiations to explore a possible merger. Sabadell’s shares rose 3.5 per cent on the news.

DUBLIN

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Bank of Ireland fell 0.5 per cent to €10.04 despite raising its full-year interest income forecast. The lender said it now expects its full-year net interest income to decline by only 3-4 per cent its exit level last year, compared to its previous forecast for a 5-6 per cent drop, as it sees a slower pace of rate cuts from the European Central Bank (ECB). Net interest income was running at an annualised rate of €3.65 billion at the end of 2023. Rival AIB traded flat at €4.86.

Iseq heavyweight Ryanair fell by 1.5 per cent to €20.10. Smurfit Kappa and Kerry group were marginally down on the day.

EUROPE

The benchmark Stoxx index hit a volatile patch in April and is trading nearly 14 per cent away from its record high. It logged its first monthly decline in six, knocked down by record-high interest rates, Middle East tensions and uncertainty about the ECB monetary policy outlook.

Miners and energy are on track to become the top sectoral performers this month, while financial services and insurers are the worst hit. On the day uncertainties around the path for US monetary policy following data that showed an increase in US first-quarter labour costs caused euro zone yields to tick higher, which weighed on equities.

Vonovia climbed 3.9 per cent and outperformed German’s DAX after the country’s largest real estate group’s return to profit in the first quarter. Finnish engineering group Cargotec jumped 16.3 per cent to the top of the Stoxx 600 after first-quarter results. Satellite company SES shed 14 per cent on agreeing to buy all shares of Intelsat Holdings for about $3.1 billion and reporting first-quarter results.

LONDON

The FTSE 100′s recent rally stalled on Tuesday as early gains were wiped out by international pessimism.

The index started the day brightly, lifting to its latest record high as it benefited from strong earnings updates from the likes of Whitbread and HSBC. It spent most of the day with firm gains but slumped towards the end of trading as weaker sentiment in the US acted as a drag. London’s top index finished 2.9 points, or 0.04 per cent, lower to end the day at 8,144.13.

In company news Whitbread shares jumped after the hospitality giant announced a major shake-up which will axe around 1,500 jobs across the UK. The group, which owns restaurants including Brewers Fayre and Beefeater, has said it plans to slash its chain of branded restaurants by more than 200 in favour of building more hotel rooms. Investors welcomed the news, with shares lifting 120p to 3,167p.

HSBC shares were also higher despite chief executive Noel Quinn announcing his plans to retire from the bank after five years.

NEW YORK

Wall Street’s main indexes fell on Tuesday, with caution prevailing ahead of the Federal Reserve’s interest-rate decision and as stronger-than-expected labour costs hinted at persistent inflation.

US labour costs increased in the first quarter amid a rise in wages and benefits, confirming the surge in inflation early in the year that will likely delay a much-anticipated interest rate cut later in 2024.

The data comes ahead of the Federal Reserve Open Market Committee’s (FOMC) two-day meeting during the day, with the interest rate verdict and chair Jerome Powell’s remarks at the end of the event in focus.

“The real problem for the Fed is that it could take some time for changes in labour costs to impact consumer pricing, and markets are getting increasingly frustrated with the Fed’s decision-making process,” said Jeffrey Roach, chief economist for LPL Financial.

On the earnings front GE HealthCare lost 11.2 per cent after the medical equipment firm missed estimates for first-quarter revenue, while US industrial conglomerate 3M gained 4.6 per cent after posting a better-than-expected quarterly profit.

Eli Lilly jumped 5 per cent after the drugmaker raised its full-year profit forecast.

PayPal rose 3.1 per cent after the payments giant raised its full-year adjusted profit forecast. – Additional reporting by Reuters

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times

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