2nd Aug 2024 08:57
(Alliance News) - European equities traded lower on Friday morning, with poor US data and largely underwhelming tech earnings unnerving markets.
The FTSE 100 index slipped 27.81 points, or 0.3%, to 8,255.55 on Friday morning. The FTSE 250 fell 257.34 points, 1.2%, at 21,201.89, while the AIM All-Share traded down 3.42 points, 0.4%, at 779.66.
The Cboe UK 100 was down 0.2% at 824.49, the Cboe UK 250 fell 0.7% to sit at 18,555.58, and the Cboe Small Companies fell 0.4% to 17,198.28.
The CAC 40 in Paris fell 0.5%, while Frankfurt's DAX 40 slumped 1.4%.
In New York on Thursday, the Dow Jones Industrial Average sank 1.2%, the S&P 500 fell shed 1.4% and the Nasdaq Composite slumped 2.3%. Amazon shares moved 6.7% lower in after hours trade as earnings disappointed, though Apple rose 0.6%.
US markets were knocked by data which suggested a worsening situation for manufacturing, and showed a stronger-than-forecast weekly jobless claims figures.
The ISM manufacturing PMI fell to 46.8 in July from 48.5 in June.
This was led by a worsening contract in new orders, while production also continued to decline. Prices continued to rise, however, and backlog remained at the same level of contraction.
In addition, the S&P Global US manufacturing purchasing managers' index fell to 49.6 points in July from 51.6 in June. It was a touch above the flash estimate of 49.5.
Figures showed US initial jobless claims were higher than expected in the week just gone.
New claims picked up to 249,000 in the week ended July 27, from 235,000 a week prior. The prior reading was unrevised.
The latest reading topped the FXStreet cited consensus of 236,000.
Friday's economic calendar sees the US jobs report at 1330 GMT. The nonfarms payrolls data is expected to show the pace of hiring eased to 175,000 in July, from 206,000 in June, according to FXStreet cited consensus.
The pound was quoted at USD1.2711 early Friday, struggling in the wake of a Bank of England rate cut, from USD1.2771 at the time of the London equities close Thursday. The euro stood at USD1.0794, up from USD1.0787. Against the yen, the dollar was trading at JPY149.09, down from JPY150.09.
"Today's US jobs data will reveal if softer employment will indeed be the primary driver for a September cut, as the Fed now sees risks to both sides of its mandate. An abatement of safe-haven flows could leave the dollar exposed to unsupportive macro drivers," analysts at ING commented.
"It was a mixed day for sterling yesterday. Having gone offered ahead of the Bank of England meeting, sterling stabilised/rallied on the 5-4 vote to cut rates and as Governor Andrew Bailey provided very little indication about future cuts. Yet as the day progressed, investors firmed up views that this was the start of an easing cycle, the short-end of the UK yield curve fell quite sharply and EUR/GBP closed towards the highs of the day."
Stocks were lower in Asia. The Nikkei 225 in Tokyo plunged 5.8%, with factors such as a stronger yen and sharp falls for chip titans, tracking their US counterparts, weighing on the index. Among them, Tokyo Electron shed 11%.
In New York, Intel plunged 19% in after hours trade. It announced plans to axe 15% of its workforce and suspend its dividend after a disappointing second quarter.
The Santa Clara, California-based chipmaker said the actions would mean operating expense and capital expenditure reductions of more than USD10 billion in 2025 compared to previous estimates.
In the second quarter, Intel posted a net loss of USD1.65 billion, swinging from net income of USD1.47 billion a year prior. Revenue fell to USD12.83 billion from USD12.95 billion.
In China, the Shanghai Composite ended down 0.9%, while the Hang Seng index in Hong Kong was down 2.1%. The S&P/ASX 200 in Sydney fell 2.1%.
In London, a poor day in Tokyo weighed on Japan-focused investors. JPMorgan Japanese Investment Trust and Baillie Gifford Japan Trust were the worst FTSE 250 performers, tumbling 4.7% and 4.5%.
Scottish Mortgage Investment Trust, which backs chip stocks such as Nvidia and ASML, fell 3.5% on the back of Intel's earnings. Scottish Mortgage was among the worst FTSE 100 performers. Nvidia fell 6.7% in New York on Thursday and shed another 1.0% after hours. ASML was down 5.5% in Amsterdam on Friday morning.
British Airways owner IAG was the top performer, however, climbing 4.6%. It said Thursday said it has abandoned plans to buy Spain's Air Europa, citing regulatory concerns.
IAG also paid its first dividend since 2019 despite a marginal fall in half-year profit. It had been expected to report results on Friday.
IAG will pay Air Europa owner Globalia EUR50 million as a result of the termination.
In February 2023, IAG said it will buy the remaining 80% stake in Air Europa for around EUR500 million, after it had secured a 20% stake in August 2022. It will continue to hold the minority interest.
Chief Executive Luis Gallego said the decision was in the best interests of shareholders.
"IAG remains committed to its strategy, including competing effectively from its Madrid hub. This is a strategy which is delivering strong results. We will continue to develop our presence in Madrid so that the hub can develop as a rival to Europe's largest hub airports.''
IAG had offered concessions to the European Commission in June, after the watchdog warned the deal could reduce competition.
But Gallego told Reuters that the commission said the concessions offered by the group were not enough.
IAG said pretax profit in the second quarter fell 2.2% to EUR1.13 billion from EUR1.16 billion a year prior. Operating profit eased 0.8% to EUR1.24 billion from EUR1.25 billion.
Revenue climbed 7.8% to EUR8.30 billion from EUR7.69 billion. Within this, passenger revenue rose 9.9% to EUR7.41 billion from EUR6.74 billion.
IAG also approved an interim dividend of 3 euro cents. IAG last paid an interim dividend in late 2019, months before the global pandemic grounded airlines around the world, causing financial havoc.
Trinity Exploration jumped 10% as it backed a new takeover offer, and withdrew its support for the bid from fellow AIM listing Touchstone Exploration.
Trinity said it has accepted a GBP26.4 million cash bid from Lease Operators. Lease Operators will pay 68.05 pence for each Trinity share, which it says is a 31% premium to the Touchstone bid, based on Touchstone's 34.8p closing price on Thursday.
Trinity said Friday: "The Trinity directors consider that the acquisition provides Trinity shareholders with an opportunity to realise a certain valuation in cash at a significant premium to the unaffected prevailing price, which reflects the current strength and future potential of Trinity. The Trinity directors also consider that the acquisition is a material improvement for Trinity shareholders over the Touchstone offer and accelerates, without further capital investment, time or operational risk, the delivery of fair value to Trinity shareholders."
Under the terms of the Touchstone offer, Trinity shareholders were to receive 1.5 new Touchstone shares for each share owned.
Lease Operators is part of drilling services company Well Services.
Touchstone shares were flat.
Brent oil was quoted at USD80.25 a barrel early Friday, down from USD80.48 at the time of the closing bell in London on Thursday. Gold rose to USD2,462.71 an ounce, from USD2,448.60.
By Eric Cunha, Alliance News news editor
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