19th May 2025 08:40
(Alliance News) - Stock prices in Europe fell after the opening bell on Monday, after a US credit rating downgrade, with equities giving back some of the trade optimism-driven advance from last week.
The FTSE 100 index opened down 43.75 points, 0.5%, at 8,640.81. The FTSE 250 was down 113.37 points, 0.5%, at 20,858.89, and the AIM All-Share was down 2.30 points, 0.3%, at 732.23.
The Cboe UK 100 was down 0.5% at 862.95, the Cboe UK 250 was 0.5% lower at 18,243.74, and the Cboe Small Companies was flat at 15,856.60.
In Paris, the CAC 40 fell 0.4%, while Frankfurt's DAX 40 fell 0.2%.
The pound surged to USD1.3353 on Monday, from USD1.3260 at the time of the London equities close on Friday. The euro climbed to USD1.1231 from USD1.1146. Against the yen, the dollar faded to JPY144.86 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 4.51%, stretching from 4.44% at the time of the London equities close Friday. The yield on the US 30-year Treasury widened to 4.99% from 4.89%.
XTB analyst Kathleen Brooks commented: "While 2-year yields are stable, the focus will be on the long end of the US Treasury curve at the start of this week. The 10-year yield has surged past the highs reached at the peak of the reciprocal tariff panic in April, while the 30-year yield has breached the 5% level, which is the highest rate since 2023. The jump in yields on Monday morning is not supportive of the dollar, as fiscal concerns are rarely FX positive.
"House Republicans have a new deadline of 26th May to pass the US budget bill, before it goes to the Senate, where it also needs to be passed before it can be signed into law by the President. At this stage, we think any delay or resistance to the Budget bill could be welcomed by the markets, especially if it causes positive fiscal effects. The risk for traders in the coming days, is that tax cuts are agreed, without enough cuts to government spending, which could blow up the US fiscal deficit, and trigger a sell off in Treasuries, the US dollar and eventually in US stocks. We will be watching developments in Washington closely this week."
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 0.8%, the S&P down 1.2% and the tech-heavy Nasdaq down 1.5%.
In London, Scottish Mortgage Investment Trust, which backs a who's who of US tech names, traded 1.8% lower. It was among the FTSE 100's worst performers.
Gold miners Fresnillo and Endeavour Mining were among the best, up 4.4% and 1.9%, as spot prices perked up amid a weaker dollar. The duo had lost 5.8% and 8.9% over the course of last week.
Gold climbed to USD3,230.56 an ounce early Monday, rising from USD3,181.86 late Friday. A barrel of Brent fetched USD64.99, down from USD65.16.
Diageo added 2.2% as 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%.
Wealth Club analyst Charlie Huggins commented: "Diageo's strong performance in the third quarter was significantly flattered by a number of one-offs, most notably a pull-forward of purchasing in anticipation of tariffs in North America. These impacts are estimated to have boosted sales by 4% in the third quarter and are expected to largely reverse in the fourth quarter.
"Even so, there are some positives for investors to take away from this statement."
Elsewhere, Ithaca Energy fell 6.7% after Jefferies cut the stock to 'hold' from 'buy'.
Cerillion fell 8.5% as it reported a decline in half-year earnings. The billing, charging and customer relationship management software solutions provider believes it is "well-placed to deliver market expectations" for the full-year, however.
Pretax profit in the half-year to March 31 fell 11% to GBP9.3 million from GBP10.4 million. Revenue fell 7.1% to GBP20.9 million from GBP22.5 million.
In Tokyo, the Nikkei 225 fell 0.7%, while Sydney's S&P/ASX 200 fell 0.6%. The Shanghai Composite in China ended flat. The Hang Seng Index rose 0.1% lower.
By Eric Cunha, Alliance News news editor
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