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Eurozone equities dip on economic slowdown
LONDON, Oct 31, 2018 (BSS/AFP) – European stock markets fell Tuesday on
news of slowing economic growth and Wall Street extending a slump.
Frankfurt and Paris both fell around one percent, while the euro extended
losses one day after German Chancellor Angela Merkel said she will not seek
re-election in 2021.
“European indices have already given up the fight and are moving lower,”
said IG analyst Chris Beauchamp.
The pace of eurozone economic expansion slowed significantly in the third
quarter, official data showed, hit by Italian fiscal crisis woes and
faltering German car output.
– Europe ‘out of favour’ –
Gross domestic product (GDP) in the 19-country single currency area rose
by just 0.2 percent from July to September, the Eurostat agency said.
That compared with 0.4 percent growth in the preceding quarter and analyst
forecasts, which were also for 0.4 percent.
“A weaker print on eurozone GDP has done little for sentiment in Europe,
and when coupled with disappointing Italian growth numbers and a drop in
French consumer spending it seems that Europe will remain out of favour,”
added Beauchamp.
Meanwhile, London’s benchmark FTSE 100 index slid 0.6 percent despite
British energy giant BP saying its profits doubled in the third quarter on
higher oil prices.
BP’s share price rallied 2.0 percent to 546.10 pence.
– Asia rises on Trump –
Most Asian markets rose as investors were cheered by Donald Trump’s belief
the US and China could reach a “great” trade deal, which helped ease concerns
over a report he is preparing to lump tariffs on all Chinese goods.
Investors had started the day on a nervous note after Bloomberg News said
the White House was lining up fresh levies if talks between Trump and Chinese
President Xi Jinping at a G20 meeting next month are unsuccessful.
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It cited unnamed sources as saying a list is being drawn up for a December
announcement to hit another $267 billion of goods with levies.
With $250 billion already targeted, the move would mean all China’s
shipments to the United States would be hit with extra levies. Beijing has
said in the past that it will retaliate against any measures.
However, in an interview aired later on Fox News Trump said that he thinks
he can “make a great deal with China”, though he tempered this by saying
Beijing was not yet ready.
Shanghai rebounded from early losses to end up one percent, with traders
also welcoming a decision by authorities that will make it easier for firms
to undertake share buybacks, giving them more scope to prevent sharp falls.
– Yuan ‘under pressure’ –
The yuan continued to struggle and hit a 10-year low, with analysts
suggesting it could break the 7 to the dollar mark.
“The Chinese Yuan remained under pressure, weakening to a fresh decade low
of 6.97 per dollar,” noted FXTM analyst Hussein Sayed.
“The rally in Chinese equities today may reverse if the currency breaks
above the key psychological level of 7, so a close eye should be kept on the
currency’s next move.
“The yuan’s weakness also reflects lack of confidence as more stimulus
means more fiscal deficit, a negative factor in the longer run.”
Meanwhile, Wall Street opened lower, with the Dow slipping less than a
tenth of a point in the first minute of trading while the Nasdaq Composite
gave up half a percentage point as investors continued to unload tech stocks.
The Dow fell 2.2 percent on Monday, with the broad-based S&P 500 losing
2.0 percent and the tech-heavy Nasdaq Composite Index lost 3.3 percent as
investors worried over slowing earnings growth.
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