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(Alliance News) - A bright start to an abbreviated trading week in London soured into the afternoon, with stocks closing Tuesday in the red despite some upbeat UK manufacturing data.
Frankfurt's DAX 30 was particularly hard-hit amid Tuesday's sea of red after Infineon Technologies warned of continued chip supply problems.
The FTSE 100 index closed down 46.64 points, or 0.7%, at 6,923.17 on Tuesday. Markets in London were shut on Monday.
The FTSE 250 ended down 167.33 points, or 0.7%, at 22,330.04 on Tuesday, and the AIM All-Share closed down 23.09 points, or 1.8%, at 1,261.67.
The Cboe UK 100 ended down 0.8% at 688.47, the Cboe UK 250 closed down 0.7% at 20,007.61, and the Cboe Small Companies ended up 0.2% at 14,691.07.
In European equities on Tuesday, the CAC 40 in Paris ended down 0.9%, while the DAX 30 in Frankfurt slumped 2.5%.
"Markets have been rocked by a wave of volatility on an otherwise inconspicuous day, with sharp declines in the DAX and Treasury yields, and cryptos giving way to dollar and gold gains," commented Joshua Mahony, senior market analyst at IG.
Frankfurt's DAX came under the most pressure, with Infineon the worst performer and car makers in the red, over microchip supply worries.
Neubiberg, Germany-based semiconductor producer Infineon closed down 5.9% after warning that microchip supply bottlenecks could continue into 2022, in a blow to the automobile industry.
"We predict that the imbalance between supply and demand will continue for a few quarters yet, with the risk that it lasts into 2022," said Infineon Chief Executive Officer Reinhard Ploss in a virtual press conference.
He added that the "bottlenecks" are a particular problem for the Munich-based company in areas where they do not produce the chips themselves, but buy them from subcontractors in order to equip microcontrollers for cars or smart appliances.
Volkswagen shares closed down 4.7%, BMW and Daimler both shed 2.7%. In London, luxury car maker Aston Martin Lagonda Global Holdings fell 2.7% while Tesla in New York slipped 3.6%.
Amid Tuesday's volatility, gold prices advanced. The safe haven metal was quoted at USD1,782.51 an ounce at the London equities close Tuesday against USD1,768.81 at the close on Friday.
This lifted the share prices of precious metal miners, with Fresnillo closing up 3.4% and Polymetal up 3.1%.
It was also a bright session for oil, with the commodity rallying on demand hopes.
"Oil is on the rise on Tuesday, extending solid gains from the previous session. Investors remain squarely focused on reopening optimism this week amid hopes that the easing of lockdown restrictions in the US and Europe will result in a rise in fuel demand," said Sophie Griffiths, market analyst at Oanda.
Brent oil was quoted at USD68.46 a barrel at the London equities close Tuesday, up from USD67.32 late Friday.
BP shares increased 2.4%, rising on the back of improved oil prices, while Royal Dutch Shell 'A' and 'B' shares rose 1.2% and 0.7% respectively.
The UK government's "green list" of countries to which people can travel without having to isolate for 14 days on their return is expected to be released this week, although it is understood details are still being finalised.
Reports suggested the list could include about a dozen countries, although some newspapers suggested it could be fewer than 10.
It comes as Boris Johnson said the approach to foreign travel this summer will be sensible and cautious to avoid "an influx of disease". Health Secretary Matt Hancock, meanwhile, expressed certainty over a "great British summer" ahead as he confirmed that a total of 50 million Covid-19 jabs have been given out across the UK.
Despite the prospect of a summer holiday season, airline shares closed the session in lacklustre fashion. easyJet trimmed early gains to finish up 0.3% while Ryanair fell 1.4%.
At the top of the FTSE 250 was Frasers Group, finishing 5.7% higher after announcing a GBP60 million share buyback. The purpose of the programme is to reduce the company's share capital, the House of Fraser owner said.
The dollar was broadly firm versus major currency pairings, though sterling gained ground after data showed the UK's manufacturing sector strengthened in April.
The seasonally adjusted IHS Markit/CIPS purchasing managers' index rose to 60.9 points in April, up from 58.9 in March and above the earlier flash estimate of 60.7. The latest reading is the highest since July 1994's record.
Markit said April saw a further acceleration in the rate of expansion of the UK manufacturing sector. Output growth was attributed to a loosening of lockdown restrictions, improved demand and rising backlogs of work.
The pound was quoted at USD1.3871 at the London equities close Tuesday, up compared to USD1.3827 at the close on Friday.
The euro stood at USD1.2015 at the European equities close Tuesday, easing from USD1.2035 at the same time on Friday. Against the yen, the dollar rose to JPY109.33 compared to JPY109.26 late Friday.
Stocks in New York were in the red at the London equities close, with the DJIA down 0.7%, the S&P 500 index down 1.3%, and the Nasdaq Composite down 2.6%.
Figures showed that the US trade deficit jumped to a record high in March as the domestic economy continued to re-open in the wake of the Covid-19 pandemic, increasing both imports and exports.
The US trade deficit widened to USD74.4 billion in March from a revised USD70.5 billion in February, the Department of Commerce said. US imports grew by 6.3% to USD274.5 billion and exports rose 6.6% to USD200.0 billion in March.
The UK corporate calendar for Wednesday has full-year results from online clothing retailer boohoo while broadcaster ITV and insurer Direct Line put out first quarter results, with lender Virgin Money UK releasing interims.
In Wednesday's economic calendar, there are PMIs from Germany and the eurozone at 0855 BST and 0900 BST respectively, and then there are eurozone producer prices at 1000 BST. In the US is ADP employment change at 1315 BST and then a Markit PMI at 1445 BST and a print from the ISM at 1500 BST.
Markets in China will remain shut on Wednesday for Labor Day, reopening on Thursday. Markets in Hong Kong are open, however.
By Lucy Heming; lucyheming@alliancenews.com
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