European shares fell on Monday, as investors awaited further stimulus measures from China to revive demand and eyed testimony from Federal Reserve chair Jerome Powell this week for more cues on the US central bank’s rate outlook.
The pan-European Stoxx 600 index shed 1 per cent, while Germany’s Dax index also dropped 1 per cent after closing at a record high in the previous session. Trading was thin on Monday with US markets shut for a public holiday. Shares of lab supplies maker Sartorius plunged 15.7 per cent after the company cut its 2023 revenue and margin forecasts on Friday.
AIB and Bank of Ireland were moderately up as financial markets awaited clues as to which way the interest rate/inflation environment is tacking from US and UK central banks later this week. AIB rose 0.6 per cent to €3.98, while Bank of Ireland rose 1.8 per cent to €9.54.
Otherwise most of the Iseq’s big hitters were in the red. Building materials giant CRH, food companies Glanbia and Kerry, gambling firm Flutter and insulation maker Kingspan all lost between 0.3 and 2 per cent. Ryanair was similarly down 2.5 per cent at €16.60 after a strong few weeks. The airline was forced to cancel some flights to and from Italy because of a strike in Italy.
Medical gear maker Getinge slumped 16.2 per cent after saying it faced additional quality and supply-chain problems that would hit the Swedish group’s second-quarter profit and also impact the business for the rest of 2023.
The focus remains on geopolitics after China and the US agreed to stabilise their intense rivalry so it doesn’t veer into conflict but failed to produce any major breakthrough, while China’s cabinet met on Friday to discuss measures to spur growth in the economy, state media reported.
China is also widely expected to cut key lending benchmarks on Tuesday in the first such easing in 10 months, a Reuters survey showed, as authorities seek to shore up a slowing recovery in the world’s second-largest economy.
“There has been a lack of a more euphoric reaction in China-related markets to the latest easing measures,” strategists at Jefferies wrote in a client note.
“Given such market action and the relatively disappointing data, the question is whether more aggressive stimulus is coming.”
China-exposed luxury giant LVMH, which is Europe’s most valuable firm, fell 1.8 per cent, while the basic resources index dropped 2.2 per cent amid demand worries from the top metals consumer.
MTU Aero Engines climbed 4.2 per cent after raising its earnings forecast for 2023, while the Stoxx Europe aerospace and defence index added 0.4 per cent. Airbus shares edged up on announcing the biggest aircraft deal in history, with an order for 500 narrow-body jets from Indian budget carrier IndiGo.
The Stoxx 600 is coming off its best performance in more than two months, as investors await testimony from Fed chair Powell on Wednesday and Thursday for further cues on the monetary policy outlook for the world’s largest economy. Meanwhile, rate hikes are also expected in Britain, Norway and Switzerland this week.
The UK’s resources-heavy benchmark index slipped on Monday, dragged by mining stocks which tracked metal prices lower, while shares of pharmaceutical major AstraZeneca slipped on a report of the drugmaker’s plans to spin off its China business.
The FTSE 100 slipped 0.7 per cent as miners of both industrial metals and precious metals slipped 1.8 per cent and 1.7 per cent, respectively.
A firmer dollar weighed on copper and gold prices, while a lack of detail on economic stimulus in top consumer China further dented sentiment.
A Reuters survey showed that China is widely expected to cut key lending benchmarks on Tuesday as authorities seek to shore up a slowing economic recovery. AstraZeneca fell 1.2 per cent, dragging the healthcare sector down 1.1 per cent on the report saying the company plans to spin off its China business and is considering a separate unit listing in Hong Kong.
The FTSE 250 mid-cap index also fell, by 0.9 per cent.
Investor focus will remain on domestic inflation data due Wednesday to assess the state of economy, leading up to the Bank of England’s decision on monetary policy on Thursday, with traders almost fully pricing in another 25-basis-point hike.
“For the BoE, the May inflation print will do little to shift the monetary policy committee’s thinking around a June rate hike as we believe a quarter-point hike is very likely a done deal,” said Sanjay Raja, chief UK economist at Deutsche Bank Research.
“At most, an upside surprise could trigger more hawkish forward guidance, with the MPC potentially doubling down on its efforts to tackle excess inflation,” Raja said. British two-year government bond yields rose to 5 per cent for the first time since July 2008. Bucking the trend, Next advanced 4.7 per cent after the fashion retailer raised its sales and profit guidance for the year. The broader retailers index rose 0.9 per cent.
Meanwhile, a survey showed a decline in asking prices for British homes in June for the first time in six years, indicating an earlier-than-usual summer slowdown amid mortgage market turmoil. – Additional reporting by Reuters