Europe open: Stocks push lower but Luxottica, Essilor rally on M&A

European stocks pushed lower in early trade, although deal news from Luxottica and Essilor provided some cheer.

At 0910 GMT, the benchmark Stoxx Europe 600 index, Germany’s DAX and France’s CAC 40 were all 0.7% lower. In London, the FTSE 100 was flat, holding up better than its European peers, underpinned by a weaker pound.

The pound fell below $1.20 for the first time since the October ‘flash crash’ following a Sunday Times report that Prime Minister Theresa May will indicate in her speech on Tuesday that she plans to pursue a ‘hard’ Brexit and quit the European Union’s single market to gain more control over migration and the country’s laws.

Meanwhile, oil prices were a touch weaker, with West Texas Intermediate down 0.2% to $52.24 a barrel and Brent crude down 0.3% to $55.30.

James Hughes, chief market analyst at GKFX, said: “For the start of the week it will be Brexit that dominates as Monday sees US markets closed for the Martin Luther King holiday in the US, so with markets closed we are likely to be looking at lower volume across the major markets.

“However the lower volatility does not always mean that we get a quiet day on the markets as lower volume can often breed higher volatility. However today’s economic calendar is looking rather light of data, with only trade balance readings from the eurozone at 1000 GMT big enough for traders to take note.”

In corporate news, Italian eyewear designer Luxottica and French lens maker Essilor rallied after the two companies announced a merger worth about €46bn.

Fund manager Ashmore advanced as it said it was confident of a strong 2017 despite a drop in quarterly assets under management.

On the downside, Swedish clothing retailer H&M was on the back foot after it reported a 6% jump in year-on-year sales in December, which was the slowest pace since September and weaker than expected.

Royal Bank of Scotland was weaker after Goldman Sachs downgraded the stock to ‘neutral’ from ‘buy’ on valuation grounds and removed the stock from its Pan-Europe Buy List.

Vodafone was also under pressure after HSBC cut its rating to ‘hold’ from ‘buy’ and trimmed the price target to 240p from 270p.