Europe’s benchmark stock index closed slightly subdued on Monday, as a result of limp oil prices that adversely affected energy shares and outweighed gains in the industrial sector. Investors remained cautious, keeping a close eye on the evolving situation in the Middle East.
The continental Stoxx 600 concluded with a fractional increase of 0.1%. Industrial and automotive sectors experienced a rise of 0.8% and 0.7% respectively, following declarations by the Ifo economic institute that German manufacturers are no longer seriously impacted by material shortages, as supply chains have nearly returned to pre-pandemic levels.
Investor vigilance was geared towards potential escalations in the Middle East, following Iran’s retaliatory strike on Israel during the past weekend which raised fears of a broader regional strife. European defence stocks went up 0.8%, keeping pace with their American counterparts.
Citi analysts commented that although the EU’s commercial risk to Iran is trivial, the ongoing increase in geo-political tensions could prompt pricier supply chain security, leading to an escalation in oil prices.
The Iseq in Dublin exhibited a slight increase, reaching 9,898.35 in parity with other European markets. The performance amongst individual stocks was varied, with AIB rising by 2.25% and the Bank of Ireland experiencing a 0.8% decrease. The third domestic banking power, Permanent TSB, saw a growth of 3%.
Food industry heavyweights Glanbia and Kerry Group suffered slights falls in share prices as the sector contemplates the implications of persistent higher interest rates in the US and beyond. Amid fluctuating oil prices linked to Middle Eastern tensions, Ryanair’s shares remained stable at €20.28.
In Europe and worldwide, energy-related shocks have played a crucial role in fuelling inflation. However, oil prices dipped by more than 1%, playing down fears of a wider regional conflict in the wake of Iran’s attack and resulted in a 1.5% drop in energy stocks.
The ECB’s Gediminas Simkus, along with counterparts Olli Rehn, Peter Kazimir and Francois Villeroy de Galhau, proposed that the central bank could implement over three rate cuts this year, acknowledging the progress made on inflation.
Since the conclusion of 2023, European stocks have been witnessing an unparalleled growth, fuelled by investor confidence in prospective monetary policy relaxation and enthusiasm for artificial intelligence (AI). Prominent luxury brands like LVMH, Hermes and Richemont witnessed a growth surge of over 1% each – a trend reflected in the overall luxury sector after it recovered from a nearly two-month low. Reports from LVMH, Nokia, Ericsson, and ASML in the forthcoming earnings season are likely to propel the momentum.
In the spotlight, shares of Temenos saw a remarkable jump of 19.5% in reaction to claimed falsehoods propagated by Hindenburg Research, as deemed by a special committee formed by the financial software firm. Meanwhile, German sporting attire manufacturer, Adidas, saw a 4.2% rise in the market after Morgan Stanley double-upgraded its position from “underweight” to “overweight”.
In London’s stock market, the FTSE 100 index faced a setback as mining and energy sectors dragged it down; a contrast to the preceding Friday’s industrial-driven incline. Nevertheless, the index had been within reach of achieving a new record high during Friday’s trading session, propelled by booming gold and oil prices. However, the uncertainty of escalating Middle Eastern conflicts, in the wake of Iran’s drone and missile attack on Israel, resulted in a dip in oil prices on Monday.
In separate news, Inchcape observed an uptick following the announcement that it will sell off its UK retail operations to US company, Group 1 Automotive, for roughly £346 million. Dismissing the significance of the UK retail wing in light of Inchcape’s international expansion, the company’s chief confirmed this decision. Consequently, shares of the London-based firm ended the day 4.1% higher.
However, recruitment firm PageGroup experienced a downturn in shares as it grappled with trading issues and job cutbacks, evident from decreased profits in recent times.
On Monday, The Dow Jones Industrial Average exceeded other Wall Street indices, primarily due to significant growth in Goldman Sachs shares. This surge, however, was somewhat tempered by increasing Treasury yields caused by greater than projected retail sales data. Goldman Sachs saw an increase of 3.1% after their first-quarter profits exceeded Wall Street predictions, bolstered by a rally in underwriting, deal making and bond trading that pushed its earnings per share to the highest level since late 2021. On the other hand, Apple experienced a drop of 0.8% following findings by research firm IDC that indicated roughly a 10% decrease in the tech giant’s smartphone shipments for the first quarter of 2024.
In separate news, electric vehicle manufacturer Tesla is set to make more than 10% of its global workforce redundant, as revealed by an internal memorandum obtained by Reuters. The company’s share value declined 3% after this announcement.
In addition, Salesforce’s share value dipped 5.5% after information surfaced, indicating that the customer relations software manufacturer allegedly held progressive discussions around a possible acquisition of Informatica, as per a reliable source referring to a Reuters report.