European shares drop amid China’s Covid spike and tight French election

Iseq advances 1.1% as Irish market bucks wider European trend

European stocks fell on Monday as investors fretted about soaring Covid-19 cases in China and an uncomfortably tight battle between French president Emmanuel Macron and far-right challenger Marine Le Pen to determine who will occupies the Élysée Palace for the next five years.

Partial results put Mr Macron in first place after the first round of voting in the presidential election on Sunday, although Ifop pollsters predicted a tight run-off on April 24th, with 51 per cent for the current president and 49 per cent for Ms Le Pen.

The pan-European Stoxx 600 index ended the session down 0.6 per cent, with rising bond yields hitting technology shares in particular.

Dublin

The Irish market managed to buck the wider European trend, with the Iseq advancing 1.1 per cent to 7,155.12 as market heavyweights Ryanair and Flutter advanced.

Banking stocks were also in demand, with Bank of Ireland up 2.2 per cent at €5.92 and AIB gaining 0.4 per cent to €1.98, as the wider European sector benefitted from rising bond yields ahead of a European Central Bank meeting later this week.

ECB policymakers are likely be caught between record high inflation and the economic hit from the war in Ukraine, although traders are ramping up bets of rate hikes this year – which would help bank margins.

Cairn Homes lost 1.8 per cent to €1.23, amid concerns that the rising costs of living are affecting affordability for would-be home buyers.

London

UK stocks ended lower as data showed the economy slowed more than expected in February, intensifying worries about a cost-of-living squeeze. Gross domestic product rose by 0.1 per cent in February, missing the 0.3 per cent rise forecast by economists in a Reuters poll.

The FTSE 100 closed 0.7 per cent lower, pulling back from its strongest level in nearly two months.

Among individual stocks, Ascential climbed 2.1 per cent after the events and analytics company confirmed a media report that it was in the early stages of evaluating the merits of a break-up of some of its businesses.

Energy services provider John Wood Group surged 12.7 per cent after Jefferies upgraded the stock to "hold" from "underperform". Weir Group slipped 3.2 per cent after the engineering firm acquired Carriere Industrial Supply.

Europe

The CAC 40 in Paris managed to eke out an 0.1 per cent gain, having been under pressure in recent weeks in the run-up to the first round of the presidential election.

While Paris stocks could remain volatile until the second round of voting in two weeks, the base case remains that Mr Macron will win, according to Mathieu Racheter, head of equity strategy at Julius Baer.

“Moreover, the risks to French assets if Le Pen wins have also diminished compared to 2017, as she is no longer advocating for a ‘Frexit’ and the likelihood of her party winning a majority in the parliamentary elections in June is slim, which would likely result in limited power,” Mr Racheter wrote in a note to clients.

Société Générale jumped 5 per cent after it agreed to sell its stake in Rosbank and the Russian lender's insurance subsidiaries.

Finnish tyre maker Nokian Tyres slumped 15.5 per cent after it said new sanctions imposed by the European Union on Russia would have a significant impact on its production.

New York

US shares were out of sorts in early afternoon trading as rising bond yields weighed on megacap growth stocks such as Microsoft, Alphabet and Apple, with investors on edge ahead of Tuesday's inflation data.

Market-leading growth and technology stocks that were underpinned by record low interest rates have come under pressure since late March on signals from the US Federal Reserve that it will hike rates aggressively to control soaring inflation.

Electric-car maker Tesla fell after data showed China auto sales plunged in March, hurt by the country's curbs to rein in Covid-19 outbreaks. Nvidia Corp fell 6.0 per cent after Baird downgraded the chipmaker. Chip stocks have been among the worst casualties of the tech sell-off, with the Philadelphia semiconductor index down more than 22 per cent so far this year. – Additional reporting: Reuters, Bloomberg

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