The Rolls-Royce Holdings logo is displayed on an engine of a Boeing 787-9 Dreamliner test aircraft at Air New Zealand’s technical operations base at Auckland International Airport. Rolls-Royce shares closed down 5.5% to 1,017 pence yesterday.
European stock markets dropped yesterday after recent rallies, while the aviation sector took a knock as Emirates airline cancelled a major order of Airbus planes.
Analysts said markets turned sour after the World Bank cut its outlook for global growth, ending a winning streak on global equities markets fuelled by upbeat US, Japanese and Chinese data.
London’s FTSE 100 index of top companies dropped 0.50% to 6,838.87 points, with losses limited by official data that revealed a further drop in British unemployment to a fresh five-year low point.
Frankfurt’s DAX 30 shed 0.79% to 9,949.81 points. On Tuesday, the index touched a fresh record high, one day after it closed above 10,000 points for the first time.
The CAC 40 in Paris slumped 0.87% to 4,555.11 points, after ending at its highest point since June 2008 a day earlier.
“Markets in Europe didn’t take too well the World Bank’s latest growth forecasts, trading in the red for most of the day,” said analyst Jasper Lawler at CMC Markets UK.
The World Bank late Tuesday lowered its 2014 global growth forecast to 2.8%, down from its 3.2% January estimate, citing bad weather in the US that depressed economic activity, a slower growth outlook in China, and the Ukraine crisis.
Meanwhile shares in the aviation sector dived yesterday.
“News of a sudden order cancellation knocked back Airbus and Rolls-Royce,” said Brenda Kelly, chief market strategist at IG traders.
“A second bolt from the blue came from Lufthansa, which issued a surprise downgrade to forecasts, knocking back UK-listed airlines too.”
Emirates yesterday announced that it had cancelled an order for 70 long-haul A350 planes from European manufacturer Airbus.
Airbus added that it was still very confident of the A350 programme and said there were almost 750 planes on its order book ready to enter service.
In London, engine maker Rolls-Royce said the cancellation would slash the value of its order book by 2.6bn pounds (€3.2bn, $4.3bn).
In reaction, shares in Airbus dropped 5% at one point. They closed down 3.1% to €52.21, while Rolls-Royce lost 5.5% to 1,017 pence.
Airlines also slumped heavily, with Lufthansa diving 14.2% to 17.08 euros and Air France-KLM falling 7% to €11.05.
In London, British Airways and Iberia parent group IAG shed 3.1% to 400 pence and Easyjet slid 4% to 1,530 pence.
Lufthansa cut its earnings targets for this year and next in the face of disappointing developments in passenger and freight business, in addition to financial fallout from strikes.
“The executive board is reducing its operating profit forecast for 2014. It now expects an operating result of approximately €1.0bn,” from its previous forecast of €1.3-1.5bn, it said in a statement.
Meanwhile shares in French steel pipes maker Vallourec slumped 11.3% to 35 euros, after it slashed its targets over falling demand in Brazil.
Asian stock markets ended mixed yesterday, with Tokyo’s Nikkei index bouncing back from the previous day’s losses and the bourses in Hong Kong and Sydney both falling. US stocks moved lower yesterday.