19th May 2025 12:03
(Alliance News) - Stock prices in Europe struggled on Monday, a US credit rating downgrade and some underwhelming data out of China keeping positivity at bay.
The FTSE 100 index fell 53.47 points, 0.6%, at 8,631.09. The FTSE 250 was down 232.50 points, 1.1%, at 20,739.76, and the AIM All-Share was down 3.31 points, 0.5%, at 731.42.
The Cboe UK 100 was down 0.6% at 861.93, the Cboe UK 250 was 1.2% lower at 18,128.56, but the Cboe Small Companies was up 0.2% at 15,881.24.
The pound jumped to USD1.3396 on Monday, from USD1.3260 at the time of the London equities close on Friday. The euro climbed to USD1.1278 from USD1.1146. Against the yen, the dollar slumped to JPY144.77 from JPY145.97.
Moody's Ratings on Friday downgraded the US long-term issuer and senior unsecured ratings to Aa1 from Aaa and changed the outlook to stable from negative.
The one-notch downgrade on the 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns, the credit rating agency said.
Moody's said successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs.
The yield on the US 10-year Treasury was quoted at just under 4.55%, stretching from 4.44% at the time of the London equities close Friday. The yield on the US 30-year Treasury widened dramatically to 5.02% from 4.89%.
In New York on Friday, before the Moody's release, the Dow Jones Industrial Average added 0.8%, the S&P 500 rose 0.7% and the Nasdaq Composite added 0.5%. But futures were sharply lower, with the DJIA called down 0.7%, the S&P down 1.2% and the Nasdaq down 1.5%.
"Although this downgrade does not necessarily spell doom for the economy—similar actions have already been taken by Fitch and S&P Global Ratings long time ago—it could translate into structurally higher borrowing costs. That, in turn, could reduce the resilience of the stock market and lead to heightened volatility," XS.com analyst Samer Hasn commented.
Gold climbed to USD3,241.87 an ounce early Monday afternoon, rising from USD3,181.86 late Friday. A barrel of Brent fetched USD64.61, down from USD65.16.
China's latest economic indicators for April offered a mixed picture with industrial production outperforming expectations while retail sales growth slowed, data from the National Bureau of Statistics of China showed on Monday.
China's urban unemployment rate fell to 5.1% in April from 5.2% in March.
Total retail sales rose 5.1% year-on-year, slowing from a 5.9% uptick in the previous month. The latest reading came in below the consensus forecast of a 5.5% increase, as cited by FXStreet.
Meanwhile, industrial production grew 6.1% year-on-year in April, easing from a 7.7% increase in March but above the 5.5% consensus forecast.
SPI Asset Management analyst Stephen Innes commented: "This imbalance—smoking factory stacks paired with ghost malls and flatlined home prices—is a red flag for anyone pricing in a durable China reflation. The manufacturing surge is externally juiced, not internally generated. And once the pre-tariff sugar rush wears off, what’s left?"
Miners traded lower in London after the China data. Anglo American lost 1.2%, while Antofagasta shed 2.0%.
Diageo fell 1.2%, giving back earlier gains, after it reported growth in third-quarter sales. The owner of Guinness and Johnnie Walker said reported net sales in the third-quarter to March 31 rose 2.9% on-year to USD4.38 billion from USD4.25 billion. On an organic basis, it improved 5.9%.
"Performance in the quarter was supported by favourable phasing which we estimate contributed [around] 4% of Q3 group organic net sales growth, mainly from North America and to a lesser extent Latin America and Caribbean, and is expected to reverse in Q4," Diageo said.
It saw a positive price/mix in all regions with the exception of Asia Pacific, where it was hurt by "continued consumer downtrading".
Diageo flagged "appropriate and selective disposals over the coming years" as it introduced 'Accelerate'.
Elsewhere in London, SDI Group surged 11%. The "buy and build" firm, focused on the manufacture of lab equipments, sensors and scientific products, expects results for the year to April 30 to be in line with current market expectations.
It hailed "strong trading over the second half", which offset a slow start to the financial year.
SDI does not expect a "material" tariff hit, meanwhile.
"Approximately 10% of revenues in FY25 were generated from sales directly to the US, and the introduction of tariffs on products sold to the US is not expected to have a material impact on the group," it added.
In Paris, the CAC 40 fell 0.7%, while Frankfurt's DAX 40 fell 0.1%.
The EU on Monday sharply cut its eurozone economic growth forecast for 2025 because of global trade tensions sparked by US President Donald Trump's sweeping tariffs.
The European Commission said the 20-country single currency area's economy should grow 0.9% in 2025 – down from a previous forecast of 1.3% – due to "a weakening global trade outlook and higher trade policy uncertainty".
The EU also lowered its prediction for eurozone growth in 2026 to 1.4%, down from 1.6% expected in November last year.
European fishing vessels will be given a further 12 years of access to British waters as part of UK Prime Minister Keir Starmer's "reset" with Brussels.
A late-night deal was struck with the EU ahead of Monday's major summit with Brussels chiefs Ursula von der Leyen and Antonio Costa.
There will be no change to current access to fish for coastal communities and no reduction in the British quota or increase in the quota the EU is allowed to catch, it is understood.
Further details of the deal are expected to be announced at the first UK-EU summit on Monday, at which Starmer will meet European Commission President von der Leyen and European Council president Costa.
Other issues under discussion included defence and security, with a potential agreement allowing British firms access to a EUR150 billion EU defence fund.
Deals on allowing British travellers to use e-gates at European airports, cutting red tape on food exports, and setting up a youth mobility scheme with the EU, were also thought to be on the table.
Starmer said: "It's time to look forward – to move on from the stale old political fights and to find common sense, practical solutions that improve the lives of British people.
"Secure borders. Cheaper bills. More jobs. We will close a deal in the national interest."
By Eric Cunha, Alliance News news editor
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