European stocks dip as French riots spark concern

European stocks sank on Monday following a weekend of protests in France, and despite a rebound in US technology stocks.

In London, the FTSE 100 Index ended down 117.21 points, 1.1%, at 10,764.69.

The FTSE 250 fell 155.41 points, 0.6%, to 24,378.49, and the AIM all-share fell 4.62 points, 0.6%, to 768.50.

In European equity markets on Monday, the CAC 40 in Paris ended down 1.1%, while the DAX 40 in Frankfurt retreated 1.2%.

European markets were sent lower after violent protests over the weekend in France left public buildings burned and hundreds of shops looted.

French President Emmanuel Macron condemned the “unbridled violence” in a televised address on Sunday night.

On Monday, French prime minister Sebastien Lecornu said that a state of emergency could be imposed “if needed”, while adding that curfews were a better solution to the crisis over violent protests.

The unrest came after weeks of student demonstrations demanding better conditions in schools.

“I am absolutely determined to restore order,” Mr Lecornu said after a crisis meeting, adding he did not rule out imposing a state of emergency.

The chaos spooked investors, sending shares lower and sparking a jump in the yield on French 10-year bonds of 15 basis points to 4.94% from 4.79% on Friday.

“Investors are becoming increasingly concerned about the unrest,” said David Morrison, analyst at Trade Nation.

“Things are now out of hand, and the current government appears powerless to respond with anything but a violent pushback from the police. Certainly, France’s national debt is a major worry, and with key elections next year, investors are voting with their feet and dumping French government bonds in favour of German bunds,” he added.

The euro also came under pressure although it recovered from earlier heavier falls.

Against the euro, sterling firmed to 1.1869 euros on Monday from 1.1860 euros at the time of the London equity market close on Friday, after earlier on Monday reaching a 17-month high.

Against the dollar, the euro faltered to 1.1221 dollars from 1.1248 dollars.

In New York, markets were higher.

The Dow Jones Industrial Average was up 0.2% at the time of the closing bell in London on Tuesday.

The S&P 500 was 0.9% higher and the Nasdaq Composite climbed 1.7%.

The rally in the Nasdaq followed a turbulent trading session on Friday which saw the technology index shed 2.1% as investors questioned the sustainability of the AI trade amid historic levels of corporate debt.

But UBS analysts said that while financing and execution risks are rising, recent semiconductor results and GPU rental prices suggest that demand for AI compute remains robust.

On Tuesday, the technology reporting season moves up a gear with results from SpaceX and Netflix, followed later in the week by Meta Platforms, Tesla and Texas Instruments.

“Earnings this week will be crucial to broader risk sentiment. In particular, (Facebook parent) Meta is in focus as the first of the five major hyperscalers to report,” said Saxo UK investor strategist Neil Wilson.

Mr Wilson said Meta’s earnings will be “dissected for spending commitments but also – critically now – signs of monetisation of AI”.

The pound was quoted at 1.3316 dollars, down from 1.3339 dollars.

Against the yen, the dollar was trading at 158.43 yen, up from 157.88 yen.

The yield on the US 10-year Treasury was quoted at 5.13%, widened from 5.08%.

The yield on the US 30-year Treasury was quoted at 5.47%, stretched from 5.42%.

Back in the UK, investors have one eye on inflation figures on Wednesday.

Deutsche Bank Research expects UK inflation to push to its highest rate all year, with headline CPI rising by 3.4% on-year in September, accelerating from 3.1% in August, with core CPI inflation pushing up to 2.7% from 2.6%.

Services CPI inflation is also forecast to rise, picking up pace to 3.7% on-year from 3.4% in August.

Barclays Capital says increased petrol prices should drive close to two-thirds of the increase in the annual rate of headline CPI, while it expects small accelerations in core goods, services and food, alcohol and tobacco.

Barclays tracks energy price inflation accelerating to 18% on-year in September from 14% in August and sees pump prices up by 5.3% on-month.

Mr Wilson at Saxo thinks the data will be a “crucial piece of the puzzle” for whether the Bank of England will raise interest rates in November.

“Recent comments from a number of Monetary Policy Committee members suggest they are starting to fret over the persistence of higher energy prices feeding second order inflation risks,” he notes.

The Bank of England meets in two weeks’ time, with the autumn Budget next week.

On the FTSE 100, miners were a weak feature after mixed economic data in China and worries over the AI demand outlook.

Anglo American shares fell 4.1%, Glencore lost 3.3%, while Rio Tinto fell 1.5%.

Barclays declined 3.5%.

The Bank of England is examining whether Barclays traders misrepresented illiquid private credit loans to understate their risk after an insider raised concerns, the Financial Times reported on Monday.

The BoE’s Prudential Regulation Authority received a complaint earlier this year about how the London-based bank was recording derivatives used to finance private credit loans, the FT said, citing people familiar with the matter.

The complaint alleged that the bank’s handling of the deals breached PRA rules, FT sources said.

On the FTSE 250, Volex fell 12% despite predicting financial 2027 underlying operating profit will be towards the upper end of current market expectations.

The Hampshire-based maker of power and data transmission products, said trading in the half-year ended September 30 was “excellent”, with year-on-year growth in every end-market.

But it cautioned headline year-on-year growth rates have started to “normalise”.

AJ Bell investment director Russ Mould pointed out the pullback follows a “very strong 12-month performance for the share price and overall, the picture remains positive, with its EV division motoring ahead impressively”.

Mr Mould thinks shareholders may “have held out some hope of profit being ahead of rather than just at the upper end of expectations and will be looking for Volex to quantify in more detail the impact of rising inflationary pressures in its supply chain”.

Gold was quoted at 4,144.06 dollars an ounce, down from 4,176.55 dollars.

Brent oil was quoted at 108.29 dollars a barrel, up from 106.06 dollars.

The biggest risers on the FTSE 100 were Marks & Spencer, up 9.1p at 419.7p, J Sainsbury, up 6.4p at 358.8p, Coca-Cola HBC, up 80p at 4,506p, Sage Group, up 17.5p at 1,139.5p and Compass Group, up 0.41p at 32.97p.

The biggest fallers on the FTSE 100 were Anglo American, Anglo American, down 164p at 3,883p, Barclays, down 15.15p at 417.5p, Glencore, down 19.3p at 563.8p, 3i Group, down 76p at 2,392p and NatWest Group, down 18p at 648p.

Tuesday’s local corporate calendar has trading statements from miner Anglo American and distribution and outsourcing company Bunzl.

Tuesday’s global economic calendar has an interest rate decision in China overnight, followed by eurozone construction output figures, UK employment data and US building permits figures.

Contributed by Alliance News