It was a rough start to the second quarter for European equities. Still, next to the losses seen on Wall Street on Monday, the damage in Europe was contained.
Europe is out of the firing line for Trump’s tariffs for now and has a lower weighting in technology companies compared to the US. Both factors make Europe a relative haven from the current negative news flow.
The FTSE 100 managed to outperform other global benchmarks, thanks in part to higher base metal prices that pushed the basic resources sector higher. Shares of Capita (LON:CPI) were amongst the biggest UK market movers. Capita shares were down 7%. Capita shareholders are bracing for the rights issue. More details of which will be known on the release of full year results later in the month.
Short covering and bargain hunting in technology stocks inspired by dramatic declines on Monday helped Wall Street inch higher. Looking behind the bluster of a trade war and political pressure on technology companies, there is a solid earnings backdrop. FactSet (NYSE:FDS) is expecting 17.3% growth in S&P 500 company earnings in Q1. Optimism about earnings needs to dethrone trade war concerns for markets sentiment to turn more positive.
The euro fell after eurozone PMIs saw a third successive month of slowing activity. Germany clocked in an 8-month low and France a 12-month low. Weak activity hurts the narrative of persistent economic growth that might eventually lead to the kind of price pressures that would lead the ECB to end its stimulus program.
The British pound gained after an unexpected pickup in UK manufacturing activity.
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