European shares had given up early gains by midday on Tuesday, as disappointing earnings in Germany pulled the continent’s benchmark index lower.
The pan-European Stoxx 600 index slipped further and was down 0.92%, with Germany’s DAX more than 1% lower. The UK’s FTSE reversed gains made in the morning, based on hopes of a post-Covid economic recovery.
“Investors are cautiously optimistic about the rise in US bond yields and what that tells us about inflation trajectories, while German shares seem to be weighing on the wider European market as tech stocks weaken further with the DAX being a tech-focused index,” said CMC Markets analyst Michael Hewson.
In the UK, the unemployment rate hit 5.1% for the first time since 2016, although this was offset by a rise in the average earnings index for the three months to December to 4.7% from 3.7%.
“Most importantly, January’s claimant count change reading saw a 20,000 reduction in the number of people claiming unemployment-related benefits, instead of the near 14,000 addition forecast. Even better, the number from December was revised from +7,000 to -20,400,” said Spreadex analyst Connor Campbell.
“So while the unemployment rate might be stealing headlines, the rest of the report was good enough to, at the very least, keep the UK markets from posting any major losses.”
Travel and leisure stocks remained the main gainers after Monday’s announcement from the UK government on a gradual easing of restrictions starting in March, with overseas holidays looking a prospect later in the year.
The news prompted a surge in holiday bookings, with easyJet reporting a jump in summer ticket sales, particularly in August, sending the company’s shares 11% higher at the opening before settling to a healthy 5.69% rise.
Upper crust owner SSP was the standout gainer, with shares soaring 15.3%.
Airline group IAG, TUI Travel as well as Premier Inn owner Whitbread and were also higher, while aircraft engine maker Rolls-Royce, which is paid by the number of hours its engines fly, also gained.
Intercontinental Hotels Group rose by more than 3%, despite posting a sharp decline in full year revenues. Aeroports de Paris and Frankfurt Airport operator Fraport were also higher.
BP and Royal Dutch Shell gained as crude oil prices hit 13 month highs.
On the downside, shares in German commercial cooking appliance maker Rational AG slumped 11.2% as it reported a cautious start to the year, saying the unpredictability of easing or tightening restrictions “is additionally unsettling many customers” with hotel and restaurant customer groups are especially hard hit.
German packaging firm SIG Combibloc was also lower, despite posting a rise in full-year net income.
HSBC Holdings shares fell after Europe’s biggest bank reported profits fell by more than a third due to the Covid-19 pandemic, while it unveiled a revised strategy focused mainly on wealth management in Asia and said it was scrapping its return on equity target.
