European shares were 2% lower at midday on Monday as investors continued to fret about the pace of interest rate rises and growing US/Russian tensions over Ukraine.
The pan-European STOXX 600 index slid further into the red from the opening as investors eyed a possible Russian attack on Ukraine as the US State Department pulled out family members of its embassy staff in Kyiv and the UK took similar measures while Nato forces were being sent to neighbouring states.
“The Federal Reserve meeting later this week is expected to confirm the fears which investors have been harbouring so far this year, namely that that apart from an acceleration of tapering, interest rate cards are also likely to pepper the remainder of 2022,” said Interactive Investor head of markets Richard Hunter.
“The current consensus is for an initial hike in March, followed by a further two or three rises which could take the rate to 1% by year end. While the moves are increasingly necessary given relatively rampant inflation, they also bring the likelihood of dampening earnings prospects.”
In equity news, shares in building cladding maker Kingspan fell more than 7.5% as the UK government threatened to restrict trading unless the industry paid to fix dangerous housing in the wake of the 2017 Grenfell tower fire which killed 72 people.
Barratt Developments, Bellway and Berkeley Group all fell as Jefferies downgraded the shares to ‘hold’ from ‘buy’.
The broker said that whether housebuilders should or will shoulder the whole burden of cladding remediation is a “complex and emotive” discussion. Even including a worst-case scenario of 12% tax rate to fund remediation, it still sees value in the sector.
Renault gained as the French carmaker, Japan’s Nissan and Mitsubishi Motors reportedly planned to triple their investment to jointly develop electric vehicles.
Unilever climbed 6% after reports that activist hedge fund Trian Partners, owned by Nelson Peltz, had built a stake in the consumer goods company.
Vodafone gained following a report that it has approached the Hong Kong owners of rival mobile phone company Three UK about a merger amid rumours the company itself could be a takeover target for a predator. According to the Mail on Sunday, Vodafone held talks late last year with Asian conglomerate CK Hutchison, owner of Three UK, about buying its rival.
