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European equities started the trading week lacking direction, as major indexes across the region bounced around flat before pulling ahead to edge higher, amid a weakness and commodities and following declines in Asia.
The pan-European Stoxx 600
SXXP,
was 0.1% higher, while in London the FTSE 100
UKX,
slipped 0.1%. Paris’ CAC 40
PX1,
lifted 0.1% and Frankfurt’s DAX
DAX,
rose 0.4%. Dow industrials futures
YM00,
were pointing up 150 points, set for a positive open after the index declined 533 points to 33,290 on Friday.
A move down in Europe followed a slump in Asian trading, led by Japan, where the Nikkei 225
NIK,
index tumbled 3.29%.
“Asian markets slumped heavily as investors continued to react to last week’s U.S. Federal Reserve meeting which has curdled sentiment by raising the prospect of earlier than expected rate rises,” said Russ Mould, an analyst at AJ Bell.
Last week’s news from the Fed has taken the wind out of the reflation trade, analysts noted, piling onto problems for commodities, after China announced plans last week to tap national metals reserves to rein in a rally in the sector. Iron ore futures for the month of June were down near 1%, while copper futures fell more than 1%.
Read: Fed, alert to risks of higher inflation, now sees two interest rate hikes in 2023
“Commodities have been pressured by the strong dollar. Given they are denominated in the U.S. currency they become more expensive to buy in other currencies when it rises,” Mould added.
Marshall Gittler, an analyst at BDSwiss, noted that “expectations of higher interest rates and lower inflation — plus China’s moves to rein in speculation — have sent commodity prices sharply lower.”
Shares in London-listed mining giants Rio Tinto
RIO,
Glencore
GLEN,
Antofagasta
ANTO,
BHP
BHP,
and Fresnillo
FRES,
were lower. Rio Tinto stock was further weighed on by a downgrade from Swiss bank UBS
UBS,
which changed its rating on the stock to sell from neutral, noting risks from a more hawkish Fed and China taking actions to deflate commodity prices.
The standout stock in Europe was Morrisons
MRW,
— one of the U.K.’s largest supermarket groups and e-commerce giant Amazon’s
AMZN,
grocery delivery partner in the country. Shares in Morrisons jumped near 32%, as analysts expect the company to attract more takeover bids, after rejecting an £8.7 billion ($12 billion) offer from U.S. private-equity firm Clayton, Dubilier & Rice over the weekend.
Plus: Vivendi agrees to sell 10% of Universal Music Group to Ackman’s SPAC
Shares in Vivendi
VIV,
the French media giant, rose near 1%, after blank-check group Pershing Square Tontine Holdings
PSTH,
— founded by billionaire American investor Bill Ackman — agreed to buy 10% of Universal Music Group on Sunday. The deal, for around $4 billion, gives Universal Music an enterprise value of €35 billion ($41.6 billion). Pershing Square stock rose more than 2% in the U.S. premarket.
Lloyds Banking
LLOY,
stock fell near 1%, after a report over the weekend that the group was set to buy its first property under a new plan to diversify its revenues by becoming a private landlord. The bank is close to securing a block of flats in Peterborough, England and could begin renting them out next month, in a move that would make it the first major U.K. retail bank to move into private rentals, the Mail on Sunday reported.
