European shares opened lower on Tuesday after Australia’s Reserve Bank lifted interest rates again and the future of the UK government remained in doubt after a less-than-convincing confidence vote win by Prime Minister Boris Johnson.
The pan-European Stoxx 600 was down 0.4% in early deals, with all major bourses lower.
Australia’s central bank raised interest rates by 0.5%, the highest increase in 22 years, and flagged more tightening to come, sending Australian equities lower. Investors are also watching for a European Central Bank meeting this week and US inflation data for signals on further rate moves.
The UK’s FTSE 100 was flat as the pound slid after Johnson survived the vote, but had to suffer the reality that 41% of his parliamentarians want him removed as leader after his lawbreaking over Covid restrictions, poor policy delivery and failure to deal with the cost-of-living crisis more swiftly.
It is also worse than the result of a similar vote that former leader Theresa May faced in 2018. She resigned as prime minister just six months later.
“The pound is under pressure as traders digest Boris Johnson’s unconvincing confidence vote victory and as the US dollar marches higher. The currency is suffering amid a lack of international investor confidence in the UK both economically and politically with criticism of Johnson’s leadership expected to continue and the potential for government legislation to be blocked by members of his own party,” said Interactive Investor head of investments Victoria Scholar.
“Given that markets hate uncertainty more than anything, the fact that sterling rallied on Monday morning after the no confidence vote was triggered speaks to Johnson’s lack of popularity among investors.”
In a light day of equity news, shares in SAS slumped 11.5% after the Swedish government said it would not inject new capital into the loss-making airline and did not plan to be a long-term shareholder.
Swiss logistics company Interroll fell after Credit Suisse cut its target price for the stock.
