European shares retreat after hitting record high; easyJet surges on takeover offer

[BENGALURU] Europe’s benchmark Stoxx 600 index pulled back after hitting a record high on Monday (Jul 6) as investors cashed in on gains following a strong run, while a US$7.3 billion take-private offer boosted shares of easyJet.

The pan-European index slipped 0.35 per cent to 650.5 points at the close. It had hit an all-time peak of 654.44 points earlier in the session, after posting its strongest weekly performance since mid-May last week.

With declines of 1.81 per cent and 1.8 per cent, utilities and healthcare stocks were the biggest drags on the index. Food and beverage shares also fell 1.67 per cent.

Germany’s DAX index bucked the broader regional weakness, however, and inched up 0.15 per cent to a record high, notching up its fifth straight session of gains.

Industrial orders in the eurozone’s largest economy rose more than expected in May.

“Investors have largely ignored German equities in Q2. We expect the tide to turn,” Deutsche Bank analysts, led by head of European equity and cross asset strategy Maximilian Uleer, wrote in a note.

“German mid-caps, especially those exposed to growing infrastructure spend, will be among the biggest winners in markets.”

Investors are also looking ahead to the earnings season, which could be pivotal for equities and provide fresh momentum if results prove stronger than expected.

“The upcoming earnings season should be a test for the artificial intelligence theme and likely shape the market performance over the coming months,” said Mohit Kumar, an economist at Jefferies.

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“There have been concerns about excess capacity and whether AI capex can deliver the expected returns. We are optimistic on the earning season. Capex remains strong and as long as money continues to flow, AI-related sectors should remain well-supported.”

Data released on Monday showed eurozone retail sales in May rose 1.6 per cent year-over-year, in line with estimates.

Top stock movers in the region included easyJet, which jumped 9.28 per cent after the British budget airline agreed in principle to a sweetened takeover offer from US investment firm Castlelake, valuing the carrier at up to £5.5 billion (US$7.4 billion).

Defence stocks were among the top sectoral gainers, up 1.33 per cent, as the Ukraine war showed no signs of easing. Investors bought defence shares on expectations that simmering geopolitical tensions would aid the sector.

Exail rose 2.12 per cent after Thales reached an agreement to buy the Gorge family’s controlling stake in the drone technology company.

Airbus gained 1.58 per cent. Industry sources said that the planemaker has set an internal goal of 900 deliveries this year after handing over more than 89 jets in June, while keeping its official full-year guidance of 870 deliveries unchanged.

Ferrari advanced 2.22 per cent after the luxury race-car maker launched a limited-edition 12-cylinder model with a manual gearbox.

JP Morgan upgraded Greece to “overweight” from “neutral”, citing expected inflows of about US$1 billion from the inclusion of certain Greek shares on the Stoxx 600 index later this year. REUTERS