Europe close: Politics and Powell comments weigh on stocks

European stocks finished firmly lower on Tuesday as ongoing political uncertainty weighed on sentiment, while the Federal Reserve quashed speculation that an interest-rate cut might be on the cards sometime soon.

The Stoxx 600 index closed down 0.9% at 511.76, with heavy losses in Frankfurt (-1.3%), Paris (-1.6%) and Madrid (-1.1%), followed by more moderate moves in London (-0.7%) and Milan (0.5%).

France's CAC 40 index has now fallen 2.3% over the past two sessions alone as political wrangling began between the left-wing alliance and President Emmanuel Macron’s centrist alliance on how to form a government.

Sunday’s second round of voting saw a shock win for the leftist grouping after a concerted tactical campaign to keep the far-right National Rally party of Marine Le Pen out of power.

However, no single group won enough seats to pass the 289 seat threshold required for an absolute parliamentary majority. This has led to concerns that any coalition would find it difficult to pass legislation.

Meanwhile, Wall Street markets opened in subdued fashion as investors monitored Jerome Powell's two-day testimony to the Senate Banking Committee.

The Fed chair pointed to "considerable cooling" in the labour market but refrained from giving any signals about when the first cut to interest rates would come. “Elevated inflation is not the only risk we face,” he warned.

Indivior and PageGroup warn on profits

FTSE 250-listed pharma group Indivior saw shares plummet on Tuesday after it issued a profit warning for 2024 on the back of "adverse market dynamics" affecting its Sublocade treatment, and announced it was discontinuing its Perseris product. The company is now guiding to adjusted operating profits of $285-320m, compared with previous projections of $330-380m, causing shares to fall 36%.

Also disappointing the market in London was recruiter PageGroup which fell 4% after warning that profits would halve this year to £60m, below the current £90m estimate, citing geopolitical and macroeconomic uncertainty.

Swedish investment group Kinnevik was a high riser on the Stoxx 600, jumping 6% after its second-quarter results which showed a 4.7% decline in net asset value on last year.

Heading the other was way French glass packaging firm Verallia, dropping 18% after revealing that full-year adjusted EBITDA would be around $866m, some $134m lower than previous guidance and the same level as 2022, due to a slower-than-expected recovery in demand.

BP was 4% lower after the energy giant said it would take a hit of up to $2bn in the second quarter relating to asset impairments along with a hit to margins and lower profits from oil trading.