European shares fell on Tuesday as Deutsche Bank and Commerzbank slumped following a big stake sale, while a US reading on inflation kept aggressive Federal Reserve tightening bets from ramping up. The pan-European Stoxx 600 index fell 0.3 per cent, paring some losses from earlier in the day.
Ryanair ticked up to €14.76 on back of bullish comments from chief executive Michael O’Leary about the upcoming summer season. Mr O’Leary said the airline was experiencing “very strong” forward bookings. Rival EasyJet also saw shares take flight after it told shareholders it expects to operate “near” pre-pandemic levels of flying this summer.
AIB and Bank of Ireland had contrasting fortunes, falling 1.5 per cent and rising 1.7 per cent respectively. The worsening economic outlook sent packaging group Smurfit Kappa and insulation maker Kingspan down by 1 per cent each. The threat to consumer spending from higher levels of inflation also hit Paddy Power Betfair owner Flutter, which fell 1.2 per cent.
London’s FTSE 100 fell on Tuesday as data showed some signs of reduced demand for labour, with healthcare and consumer staples stocks weighing the most, while Rolls-Royce dropped to the bottom of the blue-chip index on brokerage action.
The FTSE 100 dropped 0.9 per cent, with Unilever, Diageo, HSBC and AstraZeneca down between 1.2 per cent and 2.6 per cent each, while the domestically focused midcap FTSE 250 index declined 0.9 per cent.
Rolls-Royce slumped 6.4 per cent after JP Morgan downgraded the aero engineer’s stock to “underweight” from “neutral”.
Official figures showed Britain’s jobless rate fell below the level prevailing immediately before the Covid-19 pandemic, while employment rose by a weaker than expected 10,000 and job vacancies hit a record high in the three months to March.
Healthcare stocks led losses in Europe with banks also among the worst hit. Deutsche Bank and Commerzbank fell 9.4 per cent and 8.5 per cent, respectively, after an undisclosed investor sold stakes of more than 5 per cent in Germany's top lenders.
The reporting season will kick into high gear later this month, with analysts' predicting a 19.9 per cent rise in profit for Stoxx 600 companies, as per Refinitiv data. After a strong rebound from March lows, the Stoxx 600 has been stuck in a range on worries about the fallout of the Ukraine war, aggressive rate hikes by the Federal Reserve to tame inflation and rising coronavirus cases in China.
Italian defence group Leonardo rose 2.7 per cent as Deutsche Bank upgraded the stock to "buy" on expectations of higher defence spending in the company's main markets.
Nokia slipped 1.4 per cent after Pekka Lundmark, chief executive officer of the telecoms equipment maker, told Reuters the firm is pulling out of the Russian market. German investor sentiment fell by less than expected in April, a survey showed, as a decline in inflation expectations gave some cause for hope about the outlook for Europe's largest economy.
The Nasdaq led Wall Street’s main indices higher on Tuesday after data showed consumer prices rose largely in line with estimates, taking pressure off high-growth stocks that were hammered on expectations of aggressive US interest rate hikes.
The Labor Department’s report showed consumer prices shot up to 8.5 per cent in the 12 months through March, slightly higher than the estimated 8.4 per cent, although the so-called core CPI fell short of estimates at 6.5 per cent.
The benchmark US 10-year Treasury yield fell to 2.71 per cent after touching 2.83 per cent earlier in the day, a level last seen in late 2018.
Oil and gas stocks gained 1.3 per cent as crude prices rose after falling below $100 a barrel in the previous session.
The retreat in yields offered relief to megacap growth and technology stocks such as Tesla, Apple and Amazon, which rose between 2.2 per cent and 3.8 per cent. The Nasdaq is still down nearly 13 per cent this year, the worst performer among the three major indices.
US quarterly earnings season is set to begin this week with Wall Street banks. – Additional reporting, Reuters