Lisbon Market Falls Behind Europe, Builders Lead the Sell-Off

Portuguese shares opened the week on the back foot. By mid-morning Tuesday the PSI benchmark was slipping, construction names were bleeding red, and Lisbon stood out as the only major Western European market in negative territory despite a sea of small gains elsewhere on the continent.

Lisbon starts the session in reverse

The main index hovered around 8,272 points, down roughly 0.6% at 10:25, after touching an intraday low barely two points above that mark. Paris, London and Frankfurt were all mildly higher at the same hour, underscoring Portugal’s under-performance. Traders in the capital pointed to a lull in fresh domestic news and to caution ahead of euro-area inflation figures expected later this week.

Construction heavyweights drag the PSI lower

Selling pressure was concentrated in names that have rallied hardest this year. Mota-Engil dropped about 2.5% in early dealings to €5.83, while Teixeira Duarte surrendered more than 5%. The pull-back comes after both groups nearly doubled in value so far in 2024 on the back of megaprojects such as high-speed rail at home and motorway concessions in Latin America. Out of the 16 constituents of the PSI, 13 were in negative territory, giving the decline the look of a broad-based correction rather than a reaction to company-specific headlines.

Why the sudden chill?

Market desks in Lisbon talked of profit-taking after an eight-session winning streak, the absence of immediate catalysts and an uptick in Brent crude prices that rekindled inflation worries. The prospect of Thursday’s CPI snapshot for the euro zone is especially relevant for Portuguese investors because the ECB’s next policy decision could influence mortgage costs and the cost of capital for public-works contractors. When energy prices firm, builders tend to face higher asphalt, steel and transport bills, adding another reason for short-term caution.

Solid fundamentals still in place

Even so, most analysts remain upbeat. Mota-Engil’s order book hovers near €15B, fuelled by fresh rail contracts in Mexico and a 30-year tunnel concession in Brazil. For the first half of 2024 the group posted a record €59M profit and a 16% EBITDA margin, while maintaining guidance for the full year. Sector-wide, consultancy estimates point to 4% construction output growth in Portugal for 2024, driven by PRR and Portugal 2030 funds. Low net leverage – the company’s net-debt-to-EBITDA ratio is below 1.7x – has kept rating agencies on the sidelines and allowed management to reiterate its dividend policy.

What to watch next

Eyes now turn to the ECB rate decision, the euro-area CPI flash and a clutch of corporate earnings due over the coming fortnight. Any hint that borrowing costs may have peaked could restore appetite for cyclical Portuguese equities that have ridden the infrastructure boom. Until then, traders say the PSI is likely to mirror broader risk sentiment, with energy prices, geopolitical headlines and domestic housing data acting as the main swing factors.