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Europe close: Stocks finish lower as trade war concerns extend to technology space

By Alexander Bueso

Date: Monday 20 May 2019

(Sharecast News) - Stock markets across the Continent sustained heavy losses following a rout in the technology sector after the US blacklisted Chinese telecommunications equipment manufacturer Huawei last Friday, banning US companies, including chipmakers, from supplying it with much needed components.
And at the weekend, reports surfaced that Google would limit which of its services Huawei could make available on its phones.

"The broadening of the trade war to the technological sector makes it extremely difficult to gauge the implications for economic activity going forward. By now, we have become familiar with the estimates provided by a number of institutions (IMF, OECD etc.) that, under simplified assumptions, tried to model the economic impact of a trade war," said Marco Valli, Head of Macro Research at UniCredit Group.

"But what could happen if we add tech protectionism and the risk of escalation there? I suppose very few people would have a reasonably clear idea."

By the end of trading, the benchmark Stoxx 600 was down 1.06% to 377.46, alongside a drop of 1.61% to 12,041.29 for the German Dax.

Milan's FTSE Mibtel was easily the worst performer, retreating by a hefty 2.68% to 20,539.87, as multiple heavyweights, including Generali, Eni and Fiat began trading without the rights to their latest dividend.

Technology was the weakest segment of the market, with the corresponding Stoxx 600 sector gauge finishing near the day's lows after falling by 2.8%, with shares in German-based Infineon off by 4%, those in Austria's AMS declining by over 13% and ST Microelectronics's down 9%.

Shares of Travel&Tourism companies also acted as a drag, with the sub-index covering stocks in the space retreating by 1.43%.

In the background, investors were waiting on the results of the elections to the European Parliament, which were set to begin on Thursday.

On that note, over the weekend Italian deputy prime minister, Matteo Salvini, called for a revamp of the European Union's fiscal rules, which he claimed would make a 15% flat tax in Italy possible.

And on Saturday, Austrian nationalist vice-chancellor, Heinz-Christian Strache, stepped down after being caught on video offering political favours to journalists posing as heirs to a Russian oligarch.

Further afield, Ukraine's newly-appointed President, Volodymyr Zelenskiy, called snap parliamentary elections for October.

According to Germany's Ministry of Finance, factory gate prices in the euro area's largest economy edged past forecasts in April, rising at a year-on-year pace of 2.5% (consensus: 2.4%), led by a 6.6% jump in energy prices.

For later in the day, investors were waiting for a reading on Belgian consumer confidence in May.

On the company front, stock in Ryanair traded 5% lower after Europe's largest airline posted a fourth consecutive drop in annual profits and said it had "zero" visibility for the second half of the financial year just started.

Thomas Cook shares came under severe selling pressure again alongside steep losses on debt issued by the travel operator after Sky News reported that one of its payment intermediaries wants to extend the period for which it retains holidaymakers' payments for trips.

Shares of German chipmaker Infineon traded lower amid contradictory reports about whether if it had cut shipments to Huawei or not.


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