European shares subdued amid growth concerns and geopolitical tensions

European shares edged lower on Monday as investors stayed cautious in advance of major corporate earnings this week, with nerves around rising interest rates and escalating geopolitical tensions also weighing on sentiment.

The region-wide Stoxx 600 index was briefly in positive territory before closing down 0.4 per cent and extending losses to a fourth straight session. Geopolitical concerns festered after Russia launched its most widespread air strikes since the start of the Ukraine war, in what president Vladimir Putin called revenge for the explosion on the Crimea bridge.

The Stoxx 600 has fallen more than 3 per cent in the past four sessions on concerns about aggressive monetary policy tightening by central banks hampering economic growth, with data on Friday showing strong US jobs growth dousing hopes of a pivot by the Federal Reserve anytime soon.

Dublin

Trading on Dublin’s Iseq was relatively subdued apart from the 7 per cent jump in the value of Smurfit Kappa stock. The packaging group’s share price rallied strongly off lows last seen at the height of the Covid crisis after UK rival DS Smith raised its earnings outlook. Smurfit Kappa rose as much as 8.1 per cent to €30.13 at one stage on Monday before closing 7.25 per cent up at €29.88, making the group the best performer on the Iseq. AIB rose 2.6 per cent to €2.80 after the Government resumed selling down its stake in the bank last month. The State has reduced its AIB stake to 63.5 per cent from 71 per cent so far this year through the sale of small amounts of stock on the market and the June block placing. Ryanair traded flat at €10.65 despite the uncertain global outlook and the prospect of higher oil prices weighing on its prospects. CRH and Dalata both finished 1 per cent up.

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London

UK’s blue-chip stock index fell for a fourth straight session on Monday, tracking a slide in global markets, while yields shot up across the range of British debt maturities despite a raft of announcements by the finance minister and the Bank of England. The FTSE 100 index slipped 0.5 per cent and the mid-cap FTSE 250 index dropped 1.3 per cent to touch one-week lows, extending Friday’s losses, also coming under pressure as strong US jobs data doused hopes the Federal Reserve would temper rate hikes.

Energy stocks slid 1 per cent, tracking crude prices as investors weighed potentially tight supply against economic storm clouds that could foreshadow a global recession and erosion of fuel demand.

British government bond prices tumbled in a sign that investors are yet to be convinced by finance minister Kwasi Kwarteng’s drive to shore up fiscal credibility, which included bringing forward his new fiscal plan to October 31st.

British power companies Centrica and Drax fell 2.7 per cent and 4.9 per cent respectively after the Financial Times reported the UK government was pressing ahead with plans to cap revenues of renewable electricity generators.

Europe

Technology stocks fell 1.9 per cent, leading declines among Stoxx 600 sectors, followed by the real estate sector. However, they were countered to some extent by gains in chemicals and retail stocks.

ASML Holding was the biggest drag on the index as chipmakers fell after Washington introduced export controls, including a measure to cut China off from certain semiconductor chips.

Shares of other European chipmakers including Infineon and BE Semiconductor also fell between 1 per cent and 3 per cent. China-exposed European luxury companies Burberry, Kering, LVMH, Hermes and Richemont slid between 1 per cent and 2 per cent as Chinese holiday spending slumped and the domestic Covid-19 situation worsened over the National Day Golden week.

However, Renault climbed 2.4 per cent after the French carmaker and its Japanese partner Nissan said they were holding “trustful discussions” about the future of their alliance.

New York

The Nasdaq hit a two-year low on Monday as chipmakers bore the brunt of US efforts to hobble China’s semiconductor industry, while caution reigned in advance of the start of the earnings season.

The Philadelphia SE Semiconductor index tumbled 3.5 per cent to also touch a two-year low, after the Biden administration published a set of export controls on Friday, including a measure to cut China off from certain semiconductor chips made anywhere in the world with US equipment.

Some of the index’s biggest components including Nvidia, Qualcomm, Micron Technology and Advanced Micro Devices fell between 1.13 per cent and 3.65 per cent. Major US banks are set to kick off the third-quarter earnings season in earnest on Friday, amid anxiety about the impact of inflationary pressures, rising interest rates and geopolitical uncertainties on their profit.

Investors also awaited inflation reports through the week, including consumer prices data, which is expected to have likely risen last month. Tech behemoth Microsoft fell 2.22 per cent, weighing down the S&P 500 technology sector index by 1.6 per cent. - Additional reporting by Reuters