Airbus A380
Aerospace firms struggled after a negative read-across from Paris-listed Airbus / Image source: Adobe

European stocks struggled early Tuesday, though the FTSE 100 managed a slight gain, with the mood in markets uncertain after US tech shares were sold off overnight.

The FTSE 100 index traded 5.88 points higher, 0.1%, at 8,287.43. The FTSE 250 was down 57.93 points, 0.2%, at 20,504.64, though the AIM All-Share fell 0.72 of a point, 0.1%, at 771.14.

The Cboe UK 100 fell 0.1% to 824.77, the Cboe UK 250 lost 0.2% at 17,897.31, and the Cboe Small Companies was 0.1% lower at 16,893.68.

In European equities on Tuesday, both the CAC 40 in Paris was down 0.5% and the DAX 40 in Frankfurt slumped 1.1%.

On Monday, the Dow Jones Industrial Average rose 0.7%, while the S&P 500 fell 0.3% and the Nasdaq Composite tumbled 1.1%.

Nvidia was among the worst hit by the tech sell-off, with the chipmaker slumping 6.7%.

However, major names in banking, oil, retail and consumer goods ending higher in a sigh of rotation away from tech. Goldman Sachs, Chevron, Coca-Cola and Walmart all rose.

In China on Tuesday, the Shanghai Composite ended 0.4% lower, while the Hang Seng in Hong Kong was flat in late trade. The Nikkei 225 ended 1.0% higher, and the S&P/ASX 200 shot up 1.4%.

The pound was quoted at $1.2692 early Tuesday in London, barely budging from $1.2691 at the time of the European equities close on Monday. The euro stood at $1.0729, flat from $1.0728. Against the yen, the dollar was trading at JP¥159.46, falling from JP¥159.69.

‘The dollar remains sidelined ahead of two key event risks later this week. Thursday night sees the first presidential debate between President Biden and Donald Trump on CNN. It may be too early to expect this, but we will want to see whether the dollar responds to who ’wins’ the debate. A positive outcome for Trump could see the dollar edge higher. But the bigger market mover this week will be Friday’s core PCE inflation read. Should it meet expectations of a 0.1% month-on-month reading, we suspect the short-end of the US curve can come lower and take the dollar with it,’ analysts at ING commented.

The US labour market is at a point where it could become a greater issue for the Federal Reserve going forward, a senior official at the central bank said Monday.

So far, it has managed to sharply reduce inflation while causing only a slight easing to the labor market, and the unemployment rate to remain close to a half-century low.

But historical data suggest that this ‘benign outcome’ could be less likely in future, with the potential for a greater rise in unemployment, San Francisco Fed President Mary Daly said Monday.

‘Going forward, this tradeoff may not be as favourable,’ Daly, who has a vote on the Fed’s rate-setting committee this year, said in prepared remarks for an event in San Francisco.

She highlighted the relationship between job vacancies in the economy and the unemployment rate – known as the Beveridge curve – saying it suggests that ‘future labour market slowing could translate into higher unemployment, as firms need to adjust not just vacancies but actual jobs.’

In London, Admiral was the best FTSE 100 performer, rising 2.5%. Berenberg lifted the insurer to ’buy’ from ’hold’. Peer Direct Line traded flat, after the German bank cut it to ’hold’ from ’buy’.

Aerospace firms struggled. Melrose lost 4.8% and Rolls-Royce fell 3.5%. The duo were the worst large-cap performers in London after a negative read across from Paris-listed Airbus.

Airbus said late Monday it would deliver fewer aircraft than previously planned in 2024 due to supply chain problems.

It also announced it would book a charge of €900 million for its satellite business.

‘In commercial aircraft, Airbus is facing persistent specific supply chain issues mainly in engines, aerostructures and cabin equipment,’ the company said in a statement.

It said it now intends to deliver around 770 commercial aircraft in 2024, down from the 800 it forecast at the beginning of the year.

It delivered 735 commercial aircraft last year.

Airbus shares slumped 8.3% in Paris.

In Frankfurt, Merck KGaA slumped 9.8%. The pharmaceutical firm said it has discontinued a phase three probe of the xevinapant drug in locally advanced head and neck cancer.

‘The company decided to discontinue this study. The decision follows a pre-planned interim analysis performed by the study’s Independent Data Monitoring Committee, which found that the trial would be unlikely to meet its primary objective of prolonging event-free survival,’ it said.

Back in London, Funding Circle jumped 17%. It has struck a deal to sell its US business, allowing the finance provider to small business finance firm to focus on its UK offering. It will sell its US arm to iBusiness Funding LLC for £33 million in cash. The sale includes all loan portfolios.

‘The proceeds from the transaction will be reviewed in line with our capital allocation framework,’ it said.

The transaction is expected to close by the end of June.

Funding Circle Chief Executive Lisa Jacobs added: ‘In March, I announced that we were simplifying the business by exiting the US and focusing on profitable growth in the UK business. Alongside the UK restructuring actions announced in May, we are continuing to execute against this plan with the sale of the US business to IBF. The UK business is on track to be profitable in H2, in line with our guidance.’

Brent oil was quoted at $85.03 a barrel early Tuesday, down slightly from $85.07 at the London equities close Monday. Gold was quoted at $2,326.61 an ounce, down from $2,331.10.

Tuesday’s economic calendar has a US consumer confidence reading at 1500 BST.

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Issue Date: 25 Jun 2024