European shares fall on warning of deeper recession than expected

Iseq outperforms peers, rising 0.2% on the day

European Commissioner for the Economy Paolo Gentiloni. The commission warned that that economic output in the euro zone could slump by 8.7 per cent this year. Photograph: Virginia Mayo/EPA

European Commissioner for the Economy Paolo Gentiloni. The commission warned that that economic output in the euro zone could slump by 8.7 per cent this year. Photograph: Virginia Mayo/EPA

 

European stocks were lower on Tuesday, although the Iesq outperformed, after Germany posted weaker than expected industrial data and the European Commission forecast a deeper recession than previously anticipated.

Dublin

The Iseq All-Share index was virtually unchanged on the day, rising 0.2 per cent although volumes were said to be quite light.

With little stock specific news on the day, stocks that outperformed or underperformed the index were worth noting.

Insulation maker Kingspan rose 3.3 per cent to €62.40 while construction retail group Grafton, which is traded in the UK, fell 2.8 per cent.

Paper names were weak in Europe on the day with Smurfit Kappa closing 3.5 per cent lower at €28.14. Austrian and UK peers Mondi and DS Smith fared slightly better but still closed between 2.46 and 2.84 per cent lower.

Bank of Ireland gave up 2 per cent to close at €1.86 having risen 6.6 per cent on Monday. AIB was almost unchanged, closing down 0.34 per cent at €1.17.

Budget airline Ryanair outperformed its peers, closing up 0.45 per cent at €11.16. London-listed rivals IAG and EasyJet both fell on the day.

London

UK shares slipped from near two-week highs on Tuesday, with Halfords tumbling after a bleak profit expectation. The motor and cycling retailer plunged 14.1 per cent and posted its worst day in more than three months as it said it now expects a profit scenario ranging from zero to a pretax loss of £10 million.

The export-laden FTSE 100 fell 1.5 per cent wiping out most of Monday’s gains, while British mid-caps dropped 1 per cent, with banks leading declines.

Newspaper publisher Reach tumbled 14.2 per cent, the Daily Mirror owner logging its worst day since late March, as it said it would cut about 550 jobs – 12 per cent of its workforce – after the Covid-19 pandemic hit circulation and advertising.

Premier Inn owner Whitbread fell 5.5 per cent on reporting an 80 per cent plunge in first-quarter sales as the Covid-19 lockdown shuttered most of its hotels in Britain and Germany.

Online trading platform Plus500 rose 3.3 per cent after saying revenue in the first half nearly quadrupled.

Europe

The Stoxx Europe 600 Index dropped 0.6 per cent at the close, with banks and real estate shares leading losses.

Banco Santander declined 3 per cent after Bloomberg News reported it may suffer a potential hit to capital levels.

Germany’s DAX Index dropped 0.9 per cent after May factory orders missed forecasts. Adding to the gloom, the European Commission forecast a deeper contraction than previously estimated for the euro zone’s economy this year. Although the Stoxx 600 has rallied on stimulus measures and bets of an economic recovery, rising coronavirus infections in parts of the world are casting a shadow on the rebound.

Micro Focus International slid 20 per cent after writing off $922 million because of Covid-19 uncertainty.

Bayer dropped after a US judge asked to oversee yet-to-be filed lawsuits over the company’s Roundup weedkiller and expressed scepticism about the proposal’s legal validity.

New York

The S&P 500 was little changed on Tuesday a day after the benchmark index logged its longest streak of gains this year while the Dow Industrials dropped 0.7 per cent weighed down by Goldman Sachs and Boeing.

Bank stocks, whose performance is linked to the outlook for the economy, dropped 2.5 per cent.

Travel-related stocks, which were among the hardest hit during lockdowns, also fell. The S&P 1500 airlines index shed 3.5 per cent.

Novavax jumped 28.9 per cent as the US government awarded $1.6 billion to the drugmaker to cover testing, commercialisation and manufacturing of a potential coronavirus vaccine in the United States.

Royal Caribbean Group and Norwegian Cruise Line Holdings dropped 2.6 per cent and 3 per cent each, even as they announced a joint task force to help develop safety standards for restarting their businesses. – Additional reporting: Reuters/Bloomberg