European shares retreat as investors turn to bonds amid economic uncertainty

BP and Shell fall in London as oil prices slide

European stocks retreated sharply from two-week highs on Tuesday, breaking a three-day winning streak as investors flocked to bonds on worries over risks to rebounding global economic growth.

All major European bourses lost almost 1 per cent, with France’s CAC 40 down 0.9 per cent and the oil heavy FTSE 100 posting its worst session in two weeks, as government bond yields across the euro area fell to their lowest levels in at least three weeks.

German investor morale fell by much more than expected in July, but remained at a very high level, a survey showed on Tuesday, while separate data showed orders for German-made goods posted their sharpest slump in May since the first lockdown in 2020, hurt by weaker demand from countries outside the euro zone.

Euro zone monthly retail sales, meanwhile, rose more than expected in May after a drop in April. However, shares in the region took a sharp turn lower after a survey revealed US service sector activity cooled in June.



The State's two main banks Bank of Ireland and AIB fell 4-5 per cent respectively amid worse-than-expected economic data and outlook for the euro zone and on foot of news that Deutsche Bank is planning to eliminate 440 roles in Dublin, equating to almost three-quarters of its employees and contractors in Ireland. Bank of Ireland dropped by 4.9 per cent to close at €4.46, while AIB fell 4.5 per cent to €2.10.

Permanent TSB was also down 4.5 per cent at €1.25.

Building materials giant CRH was another to track downwards on doubt over global growth. The company traded down 2 per cent at €41.95.

Despite the ongoing restrictions on hospitality, hotel group Dalata rose 4 per cent to €4.02.

Food giant Kerry, which recently offloaded its consumer foods division, rose 1.2 per cent to €120.95, while insulation maker Kingspan was up 1.1 per cent at €83.66


London’s FTSE 100 marked its worst session in nearly three weeks on Tuesday, dragged down by commodity-linked and bank stocks, while a stronger pound weighed on export-oriented companies.

The blue-chip index dropped 0.9 per cent, pulled down by miners, energy and major banking stocks.

Dollar-earnings consumer staples companies Unilever, Diageo, and British American Tobacco were among the biggest drags on the export-heavy index as sterling hit over a week's high against the dollar.

Britain's £2 trillion debt mountain is becoming more exposed to inflation and interest rate shocks which are themselves becoming more frequent, said Richard Hughes, chairman of the country's budget watchdog.

British online grocer and technology group Ocado slipped 4.2 per cent despite the company saying the demand for its grocery business and technology remained strong after it announced a 20 per cent rise in first-half retail revenue.

Miners including Rio Tinto, Glencore, Anglo American and BHP fell between 2.2 per cent and 2.8 per cent and were the biggest drags. While oil majors BP and Royal Dutch Shell fell 4.1 per cent and 2.1 per cent , respectively, tracking weaker crude.


The pan-European Stoxx 600 index fell 0.5 per cent, with the automobiles and parts index sliding the most, down 2.9 per cent.

Worries about supply chain bottlenecks have weighed on the index since it hit 2015 highs in early June.

A strong rebound in euro zone business activity and optimism about a full reopening of Britain’s economy later this month have helped markets stay afloat so far in July despite rising cases of the Delta variant of the coronavirus.

French train- maker Alstom slumped 8.4 per cent to the bottom of the Stoxx 600 after it forecast negative free cash flow for its fiscal year.


The Nasdaq hit a record high on Tuesday as growth-focused sectors gained, while Beijing’s regulatory crackdown hammered shares of several US-listed Chinese firms.

The benchmark S&P 500, however, eased into negative territory shortly after opening at an all-time high on gains in mega-cap technology companies such as Microsoft, Apple, Amazon and Alphabet .

Nine of the 11 major S&P 500 sectors were trading lower, while technology, communication services and consumer discretionary were up.

Investors, meanwhile, waited for clues from the US Federal Reserve’s policy minutes on when quantitative easing might be tapered. It will be released on Wednesday.

Didi Global shares slumped 22.8 per cent after Chinese regulators ordered over the weekend the company's app be taken down days after its $4.4 billion (€3.6 billion) listing on the New York Stock Exchange. – Additional reporting by Reuters

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times