Europe expected to pause after strong gains
European stocks traded slightly lower on Tuesday, taking a breather after sharp gains seen in the previous session following polls that allayed fears of a Brexit.
The pan-European STOXX 600 was down 0.13 percent with major bourses and sectors pointing in different directions. European stocks closed 3.7 percent higher on Monday as Brexit fears eased with London’s FTSE index seeing the most gains since August 2015, closing up 3 percent. France’s CAC and Germany’s DAX closed up 3.5 and 3.4 percent respectively, also posting their best days for several months.
Global markets reacted positively to several opinion polls over the weekend that showed that the “Remain” camp was regaining momentum ahead of the referendum on European Union membership on Thursday. Polls released Monday evening for The Telegraph newspaper and The Times showed conflicting voter intentions, however.
Asia extended Monday’s global rally on Tuesday with easing Brexit concerns continuing to buy stocks. The pound was also trading higher at $1.4736, up from levels of around $1.40 last week.
Sharp swing?
With markets becoming sensitive to opinion polls on the referendum, there are concerns a sharp sell-off could occur if opinion polls turn again to show a swing in favor of the leave camp.
“Financial markets appear to be taking the view that the race may well already be run, which given the twists and turns seen already in this campaign may well be extremely far sighted, or dangerously premature,” Michael Hewson, chief market analyst at CMC Markets, wrote in a note on Tuesday.
“With more polls due out later today we can expect to see further volatility unfold in the event of a move either way.”
Miners under pressure
Oil prices fell in early Asian trade on Tuesday after a strong two-day rally that was fed by easing Brexit concerns, allowing market participants to focus on supply issues, Reuters reported. Saudi Arabia’s crude oil exports also dropped despite high production levels, suggesting demand remains in a deficit to supply.
Metal prices also dipped, weighing on basic resource stocks. Rio Tintoand Anglo American were among some of the worst-performers in the sector.
And BHP Billiton was lower after an update in which it explained plans to boost coal output and cut costs. A fall in the price of gold also put pressure on precious resource miners Fresnillo and Randgold Resources which were trading in the red.
Whitbread rallies
In individual stock news, French telecoms operator Bouygues was trading higher after Kepler Cheuvreux raised the rating on the stock from “reduce” to “buy”.
Shares of Whitbread – the owner of Premier Inn and Costa – rallied after the British firm said sales rose 8 percent in the first quarter.
Elsewhere, public pension fund Boston Retirement System, filed a bondholders class action lawsuit against Volkswagen claiming that the German carmaker’s “false and misleading statements and omissions” cause its bonds to trade at “artificially inflated prices” and fall after the emissions scandal became public. Volkswagen shares were trading lower.
Banks resilient
The banks were outperforming the broader STOXX 600. Shares of France’s Credit Agricole were higher after it said on Tuesday that 83 percent of its shareholders elected to receive their dividend in the form of shares.
Italy’s Banca Popolare di Milano (BPM) is to cut its stake in asset manager Anima Holding. BPM would have had to launch a full takeover bid for Anima under Italian regulation because of the size of the stake it owned in the company. If it cuts it stake, it won’t have to do this. Shares of BPM were in the black.
And Banco Popolare said it sold around 152 million euros ($172.46 million) worth of non-performing loans to Banca Ifis, sending shares of the lender higher.
In Sweden, Daily Svenska Dagbladet reported on Monday that Nordeamay need extra capital, citing internal documents. But the Swedish Financial Supervisory Authority said that the bank had met its capital requirements. And Nordea said in a statement on Tuesday that Daily Svenska Dagbladet’s article is “highly speculative and with no real substance”, adding that it has “enough capital to fulfill all capital requirements”. Shares of Nordea were lower.
Source: CNBC
