Airbus sign on building
Paris-based plane maker will deliver fewer aircraft than previously planned in 2024 / Image source: Adobe

Stocks in Europe took a hit on Tuesday around midday, as election nerves in the UK and France heat up.

Amongst individual stocks, Rolls-Royce and Melrose took a hit following a forecast warning for Airbus.

The FTSE 100 index traded 15.07 points lower, 0.2%, at 8,266.48. It has risen some 3.9% so far in the second-quarter of the year.

The FTSE 250 was down 130.67 points, 0.6%, at 20,431.90, though the AIM All-Share fell 2.40 points, 0.3%, at 769.46.

The Cboe UK 100 fell 0.4% to 822.43, the Cboe UK 250 lost 0.7% at 17,809.77, and the Cboe Small Companies was 0.2% lower at 16,862.67.

In European equities on Tuesday, both the CAC 40 in Paris was down 0.8% and the DAX 40 in Frankfurt slumped 1.1%.

In New York, the Dow Jones Industrial Average is called down 0.1%, the S&P 500 up 0.2% and the Nasdaq Composite up 0.4%. It is a reversal in fortunes, after the Dow climbed on Monday, but the S&P and Nasdaq struggled, weighed down by tech shares.

End of quarter nerves, particularly in US tech, has been a theme in equity markets so far this week.

XTB analyst Kathleen Brooks commented: ‘Tech stocks, specifically the AI mega stocks, sold off sharply on Monday. Nvidia dropped more than 6% and is down more than 10% in the last five sessions, which is correction territory. As we mentioned on Monday, this was not driven by fundamental factors, in our view. The company is still expected to generate epic profits for this quarter.

‘However, Nvidia’s financial firepower is not impeding the force of the sell off. The question investors now need to ask is if the sell off has gone far enough since the stock is in correction territory, or if this is a structural shift lower, that will weigh on the major US indices and allow other regions and indices to play catch up?’

Tumbling in Paris, Airbus lost 11% after lowering its outlook. It dragged shares in London-listed jet engine maker Rolls-Royce and aerospace firm Melrose down with it. The duo were down 3.9% and 3.7%.

The Paris-based aerospace manufacturer warned it would deliver fewer aircraft than previously planned in 2024 due to supply chain problems and booked a hefty charge relating to its satellite business.

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

French politics remained in focus. President Emmanuel Macron came under strong criticism on Tuesday for warning a far-right or hard-left win in snap polls could spark a ‘civil war’, with his opponents urging him not to scare the public.

France is preparing to vote on Sunday in the country’s most polarising ballot in decades. Macron called the parliamentary polls after the far-right National Rally scored a runaway victory in European Parliament elections earlier this month.

The election is shaping up as a showdown between the far-right RN and the left-wing New Popular Front, which is dominated by the hard-left France Unbowed.

Macron warned on Monday that the programmes of the two ‘extremes’ could spark a ‘civil war’, accusing both the RN and France Unbowed of sowing tensions and dividing people.

Leaders of both left and right condemned his remarks.

In the UK, the Conservative party has withdrawn support from candidates Craig Williams and Laura Saunders after they were implicated in the General Election betting row.

PM Rishi Sunak acted after coming under mounting pressure within the party to take a tougher stance on the alleged use of inside information to bet on the timing of the July 4 poll.

But a Conservative Party spokesman said: ‘As a result of ongoing internal inquiries, we have concluded that we can no longer support Craig Williams or Laura Saunders as parliamentary candidates at the forthcoming general election.

‘We have checked with the gambling commission that this decision does not compromise the investigation that they are conducting, which is rightly independent and ongoing.’

The pound was quoted at $1.2688 early Tuesday afternoon in London, barely budging from $1.2691 at the time of the European equities close on Monday. The euro stood at $1.0723, down from $1.0728. Against the yen, the dollar was trading at JP¥159.39, falling from JP¥159.69.

Back in London, Funding Circle added 10%. It has struck a deal to sell its US business, allowing the small and medium enterprise loans platform 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.’

On AIM, engineering firm Pressure Technologies fell 11% after a ‘mixed’ first-half.

Chief Executive Officer Chris Walters said: ‘Precision Machined Components performed well in the period, with much-improved revenue and profitability, underpinned by operational improvements and capital investment. We expect this momentum to continue throughout the second half. Performance at Chesterfield Special Cylinders was impacted by the deferral of UK defence contract revenues into future years and by operational delays, including unplanned downtime for process-critical equipment in the first quarter.’

The CEO warned that while CSC will have a better second half, the first half shortfall will not be recovered.

Walters added: ‘[The] full-year performance will be further impacted by delayed order placement for new hydrogen storage contracts due to the UK general election, now expected later in FY24.’

Revenue in the first half grew 9.2% to £15.0 million from £13.8 million. Its pretax loss narrowed to £1.2 million from £1.4 million.

Brent oil was quoted at $84.65 a barrel early Tuesday afternoon, down from $85.07 at the London equities close Monday. Gold was quoted at $2,334.21 an ounce, up from $2,331.10.

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Issue Date: 25 Jun 2024