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Highlights:
- European stocks dropped 1.0%, with autos dragging markets down as geopolitical tensions rose.
- Stellantis and Aston Martin both issued profit warnings, leading to sharp declines in their stock prices.
- Rightmove shares fell 8% after REA Group withdrew its takeover bid following a rejected proposal.
European stocks closed lower on Monday, with sharp declines across the auto sector pulling markets down. The Stoxx 600 index fell by 1.0% to 522.88, retreating after hitting a record high of 528.08 on Friday, as investors adopted a risk-off approach due to heightened geopolitical tensions in the Middle East and ahead of key economic data releases later this week.
Investor sentiment shifted quickly from last week's rally, driven by China’s stimulus package, as fears over the ongoing airstrikes in the Middle East weighed on markets. Investors were also seen taking profits ahead of the eurozone inflation data due on Tuesday and US non-farm payrolls on Friday. Oil prices rose, with Brent crude increasing by 1.1% to $72.31 a barrel, as escalations in the conflict raised concerns about disruptions to global oil supply through the Strait of Hormuz.
Stellantis shares dropped by 15% in Milan after the auto manufacturer cut its North American vehicle delivery forecasts due to increased competition from China. The company also revised down its adjusted operating income margin forecast to 5.5%-7.0% for the year, from its previous double-digit guidance.
London-listed Aston Martin fell 23% after cutting full-year profit expectations, citing supply chain disruptions and weakened demand in China. The luxury carmaker also said it would not achieve its target of positive free cash flow in the second half of the year. The news came in the wake of similar profit warnings from Volkswagen, Mercedes-Benz, and BMW, all of which dropped over 2%.
In other news, shares in Rightmove plummeted 8% after Rupert Murdoch’s REA Group announced it would abandon its pursuit of the property portal following a rejected takeover proposal.
