European shares dropped on Tuesday, led by losses in France as the country’s minority government looked increasingly likely to be ousted next month, and as investors globally fretted over the US Federal Reserve’s independence.
The pan-European Stoxx 600 index fell by 0.8 per cent. France’s Cac-40 index slid 1.7 per cent and the country’s bonds stumbled as the three main opposition parties said they would not back a confidence vote which prime minister Francois Bayrou announced for September 8th over his plans for sweeping budget cuts.
Equites globally were also hit by US president Donald Trump saying he was firing Fed governor Lisa Cook over alleged improprieties in obtaining mortgage loans. Ms Cook said in a statement that the president has no authority to remove her, but Mr Trump’s statement brought back concerns about the Fed’s independence.
Mr Trump’s action is likely to run into legal hurdles, but if it passes, he could nominate a new member to the Fed board after the replacement of Governor Adriana Kugler earlier this month, amid repeated calls for lower interest rates.
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Dublin
The Iseq All-Share index fell a little over 1 per cent to 11,573.09. Banks were out of sorts, with AIB losing 0.8 per cent to €7.09 and Bank of Ireland falling 0.5 per cent to €13.09, in line with weakness across the wider sector internationally.
Home builders were also lower. Cairn Homes lost 2.2 per cent to €2.19 and Glenveagh Properties dipped 1 per cent to €1.93.
Kerry Group fell 2.1 per cent to €79.60.
London
The blue-chip FTSE 100 closed 0.6 per cent lower, coming off its record highs hit last week when markets got a lift after Fed chair Jerome Powell signalled a possible interest rate cut at the Fed’s September meeting.
In the UK, heavyweight banks and healthcare lost 0.9 per cent each, among the biggest weights on the blue-chip index.
UK’s domestically focused FTSE 250 midcap index dropped 1 per cent. Home improvement retailer Wickes languished at the bottom of the index with a 8.6 per cent fall after Deutsche Bank downgraded its rating to sell.
Rival Kingfisher also lost 4.4 per cent after Deutsche Bank cut its rating to hold, while Primark owner AB Foods dipped 4 per cent after the brokerage downgraded the stock to sell.
British American Tobacco shed 1.9 per cent after the company said its finance chief Soraya Benchikh is stepping down with immediate effect.
On the flipside, business supplies distributor Bunzl jumped 5.1 per cent after the company maintained its annual guidance and resumed a share buyback programme.
Europe
French banks BNP Paribas and Societe Generale slumped 4.2 per cent and 6.8 per cent, respectively, with the latter recording its worst day in over four months.
They weighed on the broader banks sector, the heaviest drags on the Stoxx 600, that logged its steepest single-day decline in nearly a month. All big regional bourses also closed in the red.
Orsted rose 5.8 per cent following a 16 per cent plunge in the prior session after the US halted the Danish company’s Revolution Wind project off Rhode Island.
Markets are bracing for Nvidia’s quarterly results on Wednesday, seen as a key gauge of the strength of the red-hot AI rally this year.
New York
US shares were flat in early afternoon trading as investors stuck to the sidelines amid concerns over the Fed’s independence and as they positioned themselves in advance of Nvidia’s earnings release.
The results will be a big catalyst for US stocks that have rallied over the past few years on the potential earnings growth from AI.
The AI enthusiasm has also pushed up valuations of Wall Street’s benchmark S&P 500 to above long-term averages, heightening the risk of a sell-off in case the chip giant falls short of market expectations.
Advanced Micro Devices gained after Truist Securities upgraded the chip stock to buy.
Eli Lilly rose after the drugmaker said its experimental pill cuts body weight by 10.5 per cent in diabetes patients.
EchoStar jumped after telecom giant AT&T said it has agreed to buy certain wireless spectrum licenses from the satellite communications firm.
- Additional reporting, Reuters
