Europe Markets: European stocks inch lower as Syria conflict stays on traders’ radars

April 16
15:52 2018

European stocks edged lower Monday, as traders weighed the limited strikes on the Syrian regime over the weekend.

Shares in Whitbread PLC surged after a U.S. activist hedge fund increased its stake in the British hotel and coffee-shop operator, but drops for Software AG and Polymetal International PLC helped put the brakes on the Stoxx Europe 600.

What are markets doing?

The Stoxx Europe 600 SXXP, -0.07% inched down 0.1% to 378.84, pulling back slightly after achieving three up weeks in a row.

The pan-European gauge continues to show a year-to-date fall, down 2.7%.

France’s CAC 40 PX1, +0.01% shed less than 0.1% to 5,312.86, while the U.K.’s FTSE 100 UKX, -0.24% lost 0.3% to 7,242.73. Bucking the negative trend, Germany’s DAX 30 DAX, +0.11% gained 0.1% to 2,455.83.

The euro EURUSD, +0.2920% rose to $ 1.2363 from $ 1.2331 late Friday in New York.

What is driving the market?

The key geopolitical concern for investors in recent days has been a conflict between Syria and the U.S. and its allies.

Syrian armed forces on Sunday unleashed airstrikes against rebels and shelled what rescue workers said were civilian homes, as President Bashar al-Assad sought to demonstrate his regime’s continued strength following the U.S.-led missile attack earlier in the weekend. Expectations for the Western strike had been building since a suspected chemical-weapons attack killed civilians in Syria more than a week ago. Analysts have worried about the U.S. ending up in a conflict with Russia, which backs the Middle Eastern nation’s regime.

What are strategists saying?

“The U.S., U.K. and France conducted air strikes in Syria over the weekend, but they were targeted at chemical weapons facilities and direct confrontation with Russia was avoided,” said Elsa Lignos, RBC’s global head of foreign-exchange strategy, in a note.

The development should provide support to riskier assets such as equities, according to Lignos.

Which stocks are in focus?

Whitbread shares WTB, +6.61% jumped 6.4% after Elliott Management said in a statement over the weekend that it has amassed a stake of more than 6% in Britain’s biggest hotel and coffee-shop operator. Elliott also said it believes it’s currently the largest investor in the company, whose businesses include the Premier Inn chain and Costa Coffee chain.

The development is viewed as adding to the pressure on Whitbread to spin off its Costa Coffee business, because the U.S. activist hedge fund is among the shareholders that has called for that type of move, according to multiple published reports.

Software AG SOW, -5.80% fell 4.1% after the German provider of process and integration software late Friday raised its 2018 outlook for revenue tied to cloud computing and the so-called Internet of Things. But the company also disclosed a decline in first-quarter revenue for another business.

Polymetal POLY, -7.49% tumbled 6.8% after the Russia-based miner said it will swap its Tarutin gold deposit in that country for 85% of Russian Copper Co.’s copper-gold East Tarutin deposit in Kazakhstan. The London-listed stock is down 15% so far in April, as Russian-related assets have suffered a selloff following another round of U.S. sanctions against Russian entities and individuals.

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