Europe open: Shares slump as UK energy firms face windfall tax threat
By Frank Prenesti
Date: Tuesday 24 May 2022
(Sharecast News) - European shares were sharply lower at the open on Tuesday after a sell-off in Asia as fears of a global slowdown resurfaced to hammer sentiment.
The pan-European Stoxx 600 index was down 1% in early deals after closing 1.3% higher in the previous session.
In China, the Shanghai Composite fell 2.41% and US stock futures were also plunging after Snapchat owner Snap Inc cut revenue and profits forecasts for June after the closing bell, blaming the rapidly weakening economic environment.
Snap shares plummeted more than 30% in after-hours trading, hitting other stocks in the sector.
In the UK, official data showed government borrowing fell more than expected in April but remained above pre-Covid levels.
Borrowing fell by £5.6bn from the previous year to £18.6bn, coming in below analysts' forecasts of £18.8bn and the Office for Budget Responsibility's forecast of £19.1bn. Nevertheless, it remained above pre-Covid levels - up by £7.9bn compared to April 2019 - and was the fourth-highest April borrowing since monthly records began.
UK energy stocks were hit by a combination of broker downgrades and a report that Finance Minister Rishi Sunak had ordered a plan to be drawn up for a windfall tax on the sector to help with Britain's spiralling cost-of-living crisis.
SSE and Drax were both down on downgrades by Citibank. British Gas owner Centrica also slumped 9%.
Tele2 plunged 8.1% after investment company Kinnevik sold a 7.2% stake in the telecoms operator.
Sharees in UK postal carrier Royal Mail were down almost 6% after a downgrade to "sell" by Peel Hunt.
On the upside, Norwegian advertising firm Adevinta rose 5.7% on posting a higher-than-forecast first-quarter core profit.
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