Europe close: Stocks buckle amid late wave of selling
By Alexander Bueso
Date: Tuesday 24 May 2022
(Sharecast News) - Europe's main equity indices buckled near the end of trading as selling on Wall Street picked up, especially in the technology space.
"It should be clear by now, even to the most enthusiastic dip buyer, that markets are not going to bounce any time soon," said IG chief market analyst Chris Beauchamp.
"Last week's rally at least extended into the middle of the week, but this bounce barely made it to the end of Monday's session."
The spark that set off the selling was a profit warning from US social media outfit Snap and subsequent 40% downdraft in the shares.
But according to Beauchamp, investors were simply "taking every chance they can to cut back on stocks, particularly those previous market darlings in the tech sector."
Against that backdrop, the pan-European Stoxx 600 index was down 1.14% at 431.58, alongside a 1.8% drop for the German Dax to 13,919.75.
The Stoxx 600's sector sub-index for Travel&Leisure shares recorded was the biggest drag with a retreat of 3.13%, alongside a 2.67% decline in the sector index for Technology.
Also dragging on sentiment was a 2.41% drop overnight on the Shanghai Composite index.
Euro/dollar edged higher to 1.0731, alongside a dip in Brent crude oil and for longer-term euro area government bond yields.
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 7%.
Tele2 plunged 8% after investment company Kinnevik sold a 7.2% stake in the telecoms operator.
Shares in UK postal carrier Royal Mail were down 6% after a downgrade to "sell" by Peel Hunt.
Norwegian advertising firm Adevinta surrendered early gains, finishing 3% lower despite posting a higher-than-forecast first-quarter core profit.
Further dampening the mood, S&P Global's services sector Purchasing Managers' Index printed below forecasts for May. The PMI printed at 56.3, which was down on April's reading of 57.7 and below the consensus for 57.5.
Worth noting, rival PMIs for the UK prompted some talk that the Bank of England might not go as far some were expecting with rate hikes.
According to Pantheon Macroeconomics, UK PMIs were pointing towards negative GDP growth in the second quarter, a result in part of UK specific pressures including the lifting of Ofgem's price cap, a rise in National Insurance Contributions and Brexit.
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