Europe midday: Merck, Airbus lead losses as markets fall

European stocks were firmly lower by the midday mark in Frankfurt as heavy falls in the aerospace and pharmaceuticals sectors weighed on indices across the continent.

Big falls from biopharma group Merck and aerospace giant Airbus were weighing heavily on sentiment, while growing uncertainty ahead of this week's elections in France were keeping a lid on risk appetite.

"Coming off the back of a US session that had seen weakness across both the Nasdaq and S&P 500, that same downbeat tone appears to be evident in Europe despite a lack of any particularly notable economic releases this morning," said Joshua Mahony, chief market analyst at IG.

The pan-European Stoxx 600 benchmark index was 0.3% lower by lunchtime. Germany's Dax and France's Cac 40 were the worst performers of the session, down 1% and 0.6% respectively; while markets in the UK, Spain and Italy fell by a lesser amount.

Merck plummeted after the biopharma group called time on a cancer drug trial of lack of efficacy. The company stopped its trial of head and neck cancer treatment xevinapant, marking "another surprising setback for the healthcare pipeline", according to analysts at Barclays.

Airbus was out of favour after cutting its full-year earnings targets as a result of a "degraded operating environment", meaning it would only deliver around 700 aircraft this year, compared with previous guidance of 800. Annual EBITDA is now expected to be €5.5bn, down from earlier guidance of €7bn.

Sentiment in the travel and aerospace sector was also dented by news overnight that a Boeing plane operating a Korean Air flight heading for Taiwan dropped 25,000 feet in five minutes after a fault with its pressurisation system, adding to more woes for the American aircraft manufacturer.

Meanwhile, US prosecutors recommended overnight that the Department of Justice bring criminal charges against Boeing for violating a settlement related to two fatal crashes in 2018 and 2019.

Aerospace and engineering firms were all in the red in Europe, with MTU Aero Engines, Melrose, Rolls-Royce, SAFRAN, Trelleborg and Dassault Aviation all falling sharply.

London's FTSE 100 was outperforming wider European markets, falling by just 0.1% as downside was limited by gains from heavyweights Shell and BP.

Economic data was thin on the ground on Tuesday, with revisions to first-quarter GDP in Spain the only notable release. The economy expanded by 0.8% in the first three months of 2024, up from the initial estimate of 0.7% and the 0.7% growth seen in the fourth quarter – marking the strongest quarterly growth in nearly two years. The annual growth rate was also revised 10 basis points higher to 2.5%.