European shares listless after robust week; Bayer tumbles to 14-year low

European shares were subdued on Monday after a strong week driven by aggressive bets on interest rate cuts, with drugs-to-pesticides group Bayer (OTC:BAYRY) sliding to a more than 14-year low and weighing on the healthcare sector and Germany’s benchmark index.

The pan-European STOXX 600 was little changed by 0945 GMT after jumping nearly 3% last week.

As investors started pricing in 100-basis-point rate cuts for 2024 with the first one seen as soon as April, European Central Bank officials shunned market optimism, flagging still-high inflation and a somewhat resilient economy.

“Markets are definitely jumping the gun. There’s going to be a continuous repricing of expectations about that first rate cut- the most important one because of that shift in mentality from central banks,” Daniela Hathorn, senior market analyst at Capital.com.

The healthcare sector led sectoral declines with a 0.8% loss after Bayer lost 18.9%, on track for its worst day on record, after aborting a large late-stage trial testing a new anti-clotting drug. Germany’s DAX fell 0.1%.

Separate news that the company had been ordered to pay $1.56 billion in the latest U.S. lawsuit over its commonly used Roundup weedkiller also hurt sentiment.

Meanwhile, data from the region showed producer prices fell along expectations in October, continuing a downward trend after September’s record fall.

Further, Italian bank stocks gained after Moody’s (NYSE:MCO) upgraded the outlook for the country’s sovereign debt in an unexpected boost for Prime Minister Giorgia Meloni’s government.

The FTSE MIB was down 0.2%, although futures on the benchmark index were up 0.6%.

The risk premium investors ask to hold Italian and Portuguese sovereign debt also fell, reflecting some relief.

“With Meloni coming into government, we’ve seen a stable economic landscape from Italy and the Moody’s upgrade is a move towards stability in the credit market and will improve the positive sentiment,” Hathorn added.

Among other major movers, Ashtead Group (LON:AHT) tanked 9.3% after the British equipment rental firm said it expected annual profit below expectations and a more than $2 billion depreciation charge for the year.

Julius Baer dropped 9.7% after the Swiss bank dampened profit expectations, while Austrian sensor maker AMS Osram lost 7.3% after announcing terms of a fully underwritten rights issue.

Technical products and services provider Diploma topped the benchmark STOXX 600 with an 8% rise after projecting an upbeat full-year margin.
Source: Reuters