European stocks ended lower on Monday, as traders weighed the limited strikes on the Syrian regime over the weekend and the potential for additional U.S. sanctions against Russia.
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, -0.39% dropped 0.4% to close at 377.74, pulling back after achieving three up weeks in a row.
The pan-European gauge continues to show a year-to-date fall, down 2.9%.
France’s CAC 40 PX1, -0.04% shed less than 0.1% to 5,312.96, while Germany’s DAX 30 DAX, -0.41% fell 0.4% to 12,391.41.
The U.K.’s FTSE 100 UKX, -0.91% slid 0.9% to 7,198.20 as the pound GBPUSD, +0.0279% rallied to $1.4323 from $1.4239 late Friday in New York.
The euro EURUSD, +0.0242% rose to $1.2368 from $1.2331 on Friday.
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.
The U.S. has said it would launch a round of fresh sanctions on Russia and target companies tied to the Syrian regime and its chemical weapons. However, analysts said the missile attack over the weekend was considered a one-off, calming fears of a wider conflict.
What are strategists saying?
“The avoidance of World War 3 has created an eerie calm across the markets. The limited and targeted strikes in Syria that provoked no serious response from Russia were a relief to markets that were pricing in escalation,” said Jasper Lawler, head of research at London Capital Group, in a note.
“Stocks fell across Europe but that may have been more a function of a resurgent euro than concern about Syria. If it really is ‘Mission Accomplished’ as Trump says, markets can stop worrying and move on. We are now looking for signs the market can finally refocus on strong earnings without the geopolitics,” he added.
Which stocks are in focus?
Whitbread shares WTB, +7.19% jumped 7.2% 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, -5.98% fell 6.1% 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, -9.53% tumbled 9.5% after the Russia-based miner said it would 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.
WPP shares WPP, -6.48% fell 6.5% after its longtime chief executive, Martin Sorrell, resigned from his job of the advertising heavyweight.
Sorrell stepped down in the face of a company investigation into an allegation of personal misconduct. The move ends his more than three decades of leadership at the world’s largest advertising company, which he founded.
