Europe midday: Stocks mixed amid worries about Greece, Spain
European stocks were mixed as investors continued to grapple with worries over Greece and a political shake-up in Spain, ahead of a raft of US data releases that could provide clues on the timing of an interest-rate hike.
By 12:00 BST, the Stoxx Europe 600 index was up 0.1% and France’s CAC was up 0.3%, but Germany’s DAX was 0.5% weaker.
In the periphery, Spain’s IBEX 35 was down just 0.1%, clawing back early-morning losses having suffered heavy falls in the previous session. The ruling People’s Party was battered in regional and local elections on Sunday, as voters punished Prime Minister Mariano Rajoy for four years of harsh spending cuts.
Greece’s ASE Composite fared the best, up 1.4 as it rebounded from a whopping 3% drop on Monday on comments from the country’s interior minister Niko Voutsis on Sunday that the government simply will not have the money it is due to repay the International Monetary Fund next month unless it agrees a deal with international creditors over further aid. Greece is due to repay €1.6n to the IMF between 5 June and 19 June.
“Unfortunately, the general election later this year was always going to pose a threat to any recovery this year as despite overseeing a turnaround, the popularity of the ruling People’s Party is at a more than 20 year low,” said Craig Erlam, senior market analyst at Oanda.
“The voting over the weekend was also very fragmented making an overall majority for any party very unlikely while the rise of parties like Podemos could pose further problems for the Eurozone down the road,” he said. “The success of Podemos at the election later this year could be supported or severely hampered by the success or failure of Alexis Tsipras’ negotiations with the country’s creditors in the next couple of weeks,” added Erlam, noting that anti-corruption left-wing party Podemos has been likened to Tsipras’ Syriza party.
“As it stands, negotiations aren’t going to well for Tsipras and I would bet that the rise of parties like Podemos aren’t helping his cause. Leaders across the eurozone will not want to be seen giving in to the demands of these parties and the harder the stance they take with Tsipras, the less likely it is that they will have to go through it over and over again in the future,” added Erlam.
In currency markets, the euro was trading at $1.0908, still weak but off the one-month low hit against the greenback in Asian trade.
“The twists and turns of the EUR/USD rate are far from over,” said Kit Juckes, chief currency strategist at Societe Generale.
“The Greek government will need some form of deal in order to release further funds if it is to avoid missing payments to the IMF in June. Whether Greek PM Tsipras can negotiate a deal that is acceptable to enough MPs of his party isn’t clear and markets are once again, very edgy,” added Juckes.
On the corporate front, shares in Ryanair surged 6% after the company posted a 66% rise in full-year profit after tax, with passenger numbers up more than three times the company’s targeted level.
With nothing of note due on the European calendar, investors will turn their attention to the US, where there’s a slew of data scheduled for release.
Durable goods orders are 1330 BST and S&P/Case Shiller house prices are at 1400 BST, while consumer confidence and new home sales figures are at 1500 BST.