European stocks muted as concerns linger over US debt ceiling

Pan-European Stoxx 600 largely unchanged after touching a more than one-year high on Friday

Traders on the floor at the New York Stock Exchange during the opening bell on May 22nd, 2023. Wall Street stocks were mostly higher early Monday ahead of afternoon fiscal talks between President Joe Biden and Republican leaders to avert a US debt default. Photograph: ANngela Weiss/AFP

European stocks were flat on Monday as investors awaited the outcome of US debt ceiling talks while assessing monetary policy outlook in the United States and Europe, with UK’s Dechra Pharmaceuticals slumping after a profit warning.

The pan-European Stoxx 600 index was largely unchanged after touching a more than one-year high on Friday. Germany’s blue-chip Dax dropped 0.3 per cent after hitting an all-time high in the prior session.

President Joe Biden and congressional Republican speaker Kevin McCarthy were set to meet on Monday to discuss raising the federal government’s debt ceiling, just 10 days before the United States could face an unprecedented default. “There’s always the risk that despite the positive developments those negotiations might fall apart at the last minute and that’s what markets are concerned about,” said Andrea Cicione, head of research at TS Lombard.

Meanwhile, French ECB policymaker Francois Villeroy de Galhau noted that European Central Bank interest rate rises were likely to peak out by summer’s end, but the issue was how long rates remained elevated rather than the exact level.

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Dublin

Ryanair rose 1.3 per cent to €15.84 as chief executive Michael O’Leary aims to boost the budget airline’s profit by 10 per cent this year after almost record earnings for its last financial year. He said Ryanair might do better if rival airlines’ “irrationally exuberant” summer fare forecasts were correct. The airline has swung back into profit over the past year due to strong traffic recovery, higher air fares, and advantageous fuel hedges despite recording a fourth quarter loss of €154 million, its annual results show.

Most of the other stocks on the Dublin bourse were flat or in the red with the exception of AIB, which was up 1 per cent, home-builder Glenveagh, which was up nearly 2 per cent, and Paddy Power-owner Flutter, which was up 1.3 per cent. Bank of Ireland, Cairn Homes, CRH and Smurfit Kappa all lost ground.

Europe

European chip stocks were unfazed by China’s move to bar US firm Micron Technology from selling memory chips to key domestic industries. Shares of STMicroelectronics and ASM International were up 0.7 per cent and 1.9 per cent respectively.

“Although the news is negative for sector sentiment given that China represents between 10 per cent and 40 per cent of sales for most companies... we cannot make a general statement as US memories are fungible with Korean ones (Samsung, Hynix) while other products are not,” Equita analysts wrote in a note.

Among single stocks Dechra Pharmaceuticals tanked 13 per cent to the bottom of the Stoxx 600 on expectations that annual profit would be below its prior forecast amid a volatile environment and ongoing destocking by its wholesalers.

Novo Nordisk climbed 2.6 per cent after a late-stage trial of an oral version of its drug semaglutide for weight loss showed statistically significant and superior weight loss when compared to a placebo.

London

Modest banking gains helped set London’s FTSE 100 on the front foot as investors prepare for a busy week of UK economics figures. The blue-chip index closed in the green after an early-afternoon dip amid remarks from banking giant Goldman Sachs estimating the US will run out of cash in three weeks unless it solves its banking crisis.

The FTSE 100, which is internationally-focused and impacted by news in the US, gained 14.12 points, or 0.18 per cent, to 7,770.99. It was helped up by gains for banks Standard Chartered, HSBC and NatWest after NatWest revealed the UK government had sold £1.26 billion of its stake in the bank. It brings the state’s minority stake down to 38.69 per cent from around 41 per cent in its path to eventually becoming private.

In company news payments firm Wise saw its share price dip after revealing its chief financial officer would step down next year to focus on making a full recovery after suffering a cycling accident. It follows an announcement earlier this month that chief executive Kristo Kaarmann would be taking a three-month sabbatical from September to spend time with his family and newborn son. Wise’s share price was down 3.7 per cent at close.

New York

The S&P 500 was little changed, while the tech-heavy Nasdaq 100 gained 0.5 per cent, surpassing a 52-week high, even with chipmakers under pressure.

Micron Technology sank after China said the company’s products failed a cybersecurity review. Meanwhile, Facebook-owner Meta Platforms advanced after being hit with a record €1.2 billion EU privacy fine.

Treasury yields crept higher, reversing earlier declines, as St Louis Fed president James Bullard said he was thinking of two more rate hikes this year. – Additional reporting by Reuters

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times