European shares inched lower on Monday, led by healthcare, while defence stocks fell after an aborted weekend mutiny in Russia. The pan-European Stoxx 600 index slipped 0.1 per cent by late afternoon, extending losses for its sixth straight session.
Russia sought to restore calm on Monday after the aborted mutiny by Wagner Group mercenaries, while Western allies assessed how president Vladimir Putin might reassert authority and what it could mean for the war in Ukraine. Shares of major European defence firms Leonardo, Saab and Rheinmetall each dropped more than 4 per cent, weighing on the European aerospace and defence sub-index which fell 0.9 per cent.
“What we’ve seen today is probably people pricing in that the war in Ukraine could end a little bit sooner and so a lot of the defence companies have fallen,” said Shanti Kelemen, chief investment officer at M & Wealth. “It’s too early to price something into the market, that’s why the really limited move on defence stocks.”
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AIB rose 1 per cent while rivals Bank of Ireland and Permanent TSB fell 1 per cent and 3.6 per cent as investors pondered when the current cycle of ECB would end. ECB policymakers are expected to opt for another quarter point hike next month, which will be the ninth in 12 months. The debate now is whether the current price dynamic warrants a further increase in September and possibly another one after that. Iseq heavyweights CRH, Flutter, Kerry, Smurfit Kappa and Ryanair were all down between 0.1 per cent and 1 per cent, marking a weak day on markets
EUROPE
Energy stocks gained 0.8 per cent on steady oil prices despite geopolitical uncertainty in Russia. The healthcare index fell 1.1 per cent and was a big drag on the Stoxx 600 index, which has come under pressure on concerns about an economic slowdown from a potentially longer-than-expected global interest rate hiking cycle.
The index logged its biggest weekly percentage drop in three months on Friday at the end of a week filled with central bank events when data reflected weak European business growth in June.
Germany’s Dax index eased 0.1 per cent after a survey showed business morale in Europe’s largest economy worsened for the second consecutive month in June. Siemens Energy fell for a second consecutive day, hit by a raft of target price cuts and rating downgrades as problems at its wind turbine division turned out to be worse than expected last week.
Among other stocks, shares of Aston Martin rose 10.8 per cent after the British luxury carmaker said it would enter an agreement with Lucid Group to make “high performance” electric vehicles.
Cineworld Group dropped 17.9 per cent after the British cinema chain operator said it would file for administration as part of a proposed restructuring plan. Shares of SBB climbed 5.2 per cent after the Swedish real estate company entered talks to sell the remaining 51 per cent of its education subsidiary.
LONDON
London stocks edged lower on Monday as defence firms lost ground after an aborted mutiny by mercenaries in Russia, though further losses were kept in check by gains in commodity-linked stocks.
The blue-chip FTSE 100 ended 0.1 per cent lower, paring losses after hitting a three-month low earlier in the session. The more domestically-focused FTSE 250 midcap index fell 0.5 per cent, touching a three-month low.
Britain’s biggest defence company, BAE Systems, fell 2.1 per cent, while the aerospace and defence sector as a whole fell 1.3 per cent on news that the mutiny had ended. “Defence stocks tend to benefit from bad news in terms of geopolitical tensions,” said Christopher Peters, trading floor manager at Accendo Markets.
NEW YORK
Wall Street was mixed on Monday and gold prices rose on lingering concerns over the rate hike path of the US Federal Reserve as investors largely shrugged off the aborted Russian mutiny over the weekend.
Tech stocks, particularly chips, put the Nasdaq out front, with the S&P 500 showing a more modest gain. But healthcare and financials pulled the blue-chip Dow into negative territory. Market participants expect the central bank to raise the Fed funds target rate by another 25 basis points in July, but the path beyond is less clear and dependent on economic data.
Financial markets are pricing in a 74.4 per cent probability of the July rate hike, according to CME’s FedWatch tool.
Geopolitical turmoil also held risk appetites in check in the wake of an aborted mutiny in Russia, which appeared to reveal cracks in Russian president Vladimir Putin’s grip on power. Alphabet fell 1 per cent after UBS downgraded the stock to “neutral”, while Tesla slipped 0.8 per cent after Goldman Sachs cut the electric car maker’s rating to “neutral”. – Additional reporting Reuters
