Rolls-Royce slumps on European probe report

Shares in engineering and defence group Rolls-Royce fell sharply as investors got their first chance to react to a press report that European airlines are being forced to enter into anti-competitive contracts to keep their 24,000 aircraft flying.

The Financial Times said late on Friday that this comes as equipment makers seek a slice of the $60bn a year maintenance and repair market.

The FT said the European Commission has written to the airlines and aircraft component manufacturers asking for information about the provisions being written into services contract – terms that could restrict choice when servicing everything from engines to wifi networks.

Atif Latif, director of trading at Guardian Stockbrokers, said the market reaction to the news is as expected until we see some more clarity. However, he does not expect the news to have a material impact on the outlook for Rolls-Royce.

“Investors should not forget that RR has a strong balance sheet and the ability to withstand and absorb this news,” he said.

He added that price action over the last four weeks has been strong, with the stock moving between 640p and 670p, so much of Monday’s move could be a result of profit taking.

At 1145 BST, Rolls-Royce shares were down 4.5% at 721.50p.