European shares drop as Spain targets energy firms

Sentiment also hit as investors digest disappointing Chinese economic data

European shares fell on Wednesday, with followers of the utilities stocks rattled after the Spanish government passed emergency measures on Tuesday to cap energy bills and channel €2.6 billion of profits from the sector to consumers as gas and electricity prices soar across Europe.

Sentiment was also hit as investors digested disappointing Chinese economic data. Fresh figures showed China’s factory and retail sectors faltered in August with output and sales growth hitting one-year lows following fresh coronavirus outbreaks and supply disruptions.

The pan-European Stoxx 600 index dropped 0.8 per cent, with the European utilities sector tumbling 2.9 per cent as investors fretted about the prospect of other European countries following Spain’s lead.

Dublin

The Iseq declined by 0.8 per cent to 8,624.09. Banking stocks were out of sorts, with AIB off 0.4 per cent at €2.26 and Bank of Ireland down 0.6 per cent at €4.91, albeit amid low trading volumes.

Kingspan dropped by 2.3 per cent to €95.70, while Paddy Power owner Flutter Entertainment declined by 0.7 per cent to €169.60.

Smurfit Kappa declined by 0.6 per cent, with the market paying little heed to the cardboard boxmaker's successful placing of €1 billion of green bonds.

London

UK shares ended lower, weighed by industrial and consumer discretionary stocks, after data showed British inflation accelerated to a nine-year high, fuelling concerns of a sooner-than-expected stimulus tapering by the Bank of England (BoE).

The FTSE 100 index slipped 0.1 per cent, while the domestically-focused mid-cap FTSE 250 index declined 1.1 per cent, recording its worst session in nearly two months.

A Reuters poll forecasts the BoE will raise borrowing costs by the end of 2022, earlier than previously thought, and there is a chance it may come even sooner.

Food delivery company Just Eat Takeaway. com dropped 4.5 per cent to the bottom of the index following a media report that Amazon and rival Deliveroo will offer free delivery to prime subscribers in the UK.

Among other stocks, Darktrace jumped 14.5 per cent after the cybersecurity company increased its revenue growth forecast for its 2022 financial year.

Irish-founded Tullow Oil added 5.4 per cent after the Africa-focused oil and gas explorer reported that it swung to a profit in the first half.

Europe

Spain’s Ibex lost 1.7 per cent, the most among regional indexes.

Retail stocks slipped 2.3 per cent on concerns over the fresh Covid-19 outbreak in China’s Fujian province and signs of tighter regulations in Macau, the world’s largest gambling hub.

French luxury goods makers LVMH and Kering fell more than 4 per cent each.

While optimism about a steady European economic recovery remains, the Stoxx 600 is on course to end its seven-month winning streak in September, as investors grow anxious over global growth and monetary policy outlook.

Fashion retailer H&M fell 3.1 per cent as quarterly sales increased less than expected, while Zara owner Inditex slipped 1.3 per cent even as sales approached pre-pandemic levels.

Swedish Match rose 4.3 per cent after the tobacco and nicotine products maker unveiled plans to spin off its US cigar business to shareholders and list it on the stock market.

New York

The S&P 500 and Dow Jones indexes were ahead in early-afternoon trading on mildly positive factory data and higher oil prices, although concerns over a slowing economic recovery and higher corporate taxes kept sentiment subdued.

The energy sector climbed to lead a rise in economically-sensitive sectors as oil prices gained on a larger-than-expected drawdown in US crude inventories.

Apple fell after losing 1 per cent in the previous session on a somewhat lukewarm response to the unveiling of its iPhone 13 and a new iPad mini.

Among other movers, lending platform GreenSky surged more than 50 per cent after Goldman Sachs Group said it would buy the firm in an all-stock deal valued at $2.24 billion.

Goldman Sachs shares fell, lagging their banking peers. – Additional reporting: Reuters

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times

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