Europe close: Markets fall as geopolitical tensions rise

16th Apr 2024 16:26

(Sharecast News) - European markets were still in the red at the end of the day on Tuesday, tracking a global sell-off as investors mulled Israel's potential reaction to an Iranian missile attack over the weekend.

The pan-European Stoxx 600 was down 1.58% at 497.92 points.

Germany's DAX was off 1.57% at 17,744.46 points, while France's CAC 40 index declined 1.53% to 7,921.97 points.

The FTSE 100 in London saw a notable decrease of 1.82%, ending the day at 7,820.36 points.

In currency markets the euro was last up 0.09% on sterling, trading at 85.44p, while it slipped marginally against the dollar, down 0.02% to change hands at $1.0622.

"It has been another tough day for global markets, and limited gains in the US are disappearing as traders continue to derisk thanks to the ongoing uncertainty in the Middle East," said IG chief market analyst Chris Beauchamp.

"The threat of an Israeli response to Iran's attacks on Saturday, and yesterday's strong US retail sales data, remain the drivers of the declines."

Beauchamp said investors had become used to a steady drift higher in recent months, and had written off the indecision of March and April as a "digestion" of gains before another leg higher.

"But ultimately, such pullbacks as we are seeing now are a common occurrence.

"We have moved swiftly from 'greed' to 'fear', but such drops give investors the chance to jump on board the rally at better levels than would be the case otherwise."

Investor sentiment boosted in Germany, UK unemployment rises

In economic news, investor morale in Germany saw a stronger-than-expected boost this month, according to fresh survey data.

The ZEW indicator of economic sentiment surged to 42.9, marking an increase of 11.2 points from March and surpassing analyst forecasts for 35.1.

Additionally, the assessment of the current economic situation in Europe's largest economy rose slightly by 1.3 points to -79.2, though expectations had been for a reading closer to -76.

In the eurozone as a whole, the ZEW indicator of economic sentiment climbed 10.4 points to 43.9 in April, reaching its highest level since February 2022 and exceeding market expectations.

"A recovering global economy is boosting expectations for Germany, with half of respondents anticipating the country's economy to pick up over the next six months," said Achim Wambach, president of the ZEW economic institute.

"Further contributing to the heightened optimism are the much-improved assessments of the situation and economic expectations in Germany's export destinations."

On home shores, fresh official data showed a rise in the UK's unemployment rate to 4.2%, accompanied by a notable increase in the number of economically inactive individuals and a slowdown in hiring by employers.

The unemployment total grew 85,000 in the three months to February, reaching 1.44 million, pushing the jobless rate to its highest level since last summer.

Employment figures also saw a decline, with 156,000 fewer people in work during the quarter, totaling 32.98 million.

Additionally, the number of economically inactive individuals increased by 150,000 to 9.404 million, while the count of payrolled employees dropped by 67,000 in March to 30.3 million.

On a separate note, regular wages excluding bonuses recorded a 6.0% growth year-on-year in the same period, slightly down from the 6.1% rise reported for the November-to-January period by the Office for National Statistics.

Across the Atlantic, data from the US Department of Labor revealed that builders initiated fewer new housing projects last month than expected.

Housing starts experienced a month-on-month decline of 14.7% in March, reaching an annual rate of 1.321 million, falling short of the consensus estimate of 1.48 million.

Single-family home starts decreased by 12.4% to 1.022 million.

Permits, considered a leading indicator for starts, also saw a decrease, dropping by 4.3% to 1.458 million, below the consensus forecast of 1.514 million.

Ericsson up on first-quarter results, Dr Martens tumbles

In equity markets, Swedish communications technology company Ericsson rose 1.75% following its first-quarter results.

Naturgy Energy Group added 3.36% amid reports of potential acquisition talks with Abu Dhabi's TAQA.

On the downside, Dr Martens plummeted 29.44% after issuing another profit warning and announcing the departure of chief executive officer Kenny Wilson.

Global payments technology firm Wise slid 9.91%, despite reporting strong uptake for its services in the last quarter of the financial year.

British defence group QinetiQ was 6.76% weaker by the end of trading, after it said that difficult market conditions in the US continued to impact its global solutions segment.

The departure of finance director Carol Borg also contributed to the negative sentiment surrounding the company.

Reporting by Josh White for Sharecast.com.