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European stocks turn lower as political fears resurface
LONDON, June 6, 2018 (BSS/AFP) – Most European stock markets turned lower
towards the close Tuesday as political and trade uncertainties pushed
investors to the sidelines.
London underperformed as the British government sold a chunk of Royal Bank
of Scotland at a sizeable loss, dealers said, while Frankfurt managed to just
about remain in positive territory.
Paris and many other eurozone exchanges also closed lower as political
worries in Italy and Spain resurfaced, keeping Milan and Madrid under
pressure after Italy’s new leader appeared to question eurozone debt rules.
Geopolitics are “still simmering in the background, from Rome to Madrid,
Westminster to Washington, with populist stances continuing to challenge
financial markets”, said Mike van Dulken, head of research at Accendo
Markets.
Prime Minister Giuseppe Conte on Tuesday declared that his eurosceptic
government wanted to reduce the country’s huge public debt “through growth”,
not austerity, as he made his first speech to the Italian Senate.
This did little to reassure investors who have been fearing that the new
Italian government could go on a collision course with its EU partners over
debt rules and eurozone reform.
Wall Street slipped as investors took profits after a two-day rally
fuelled by positive economic news which “has relatively overshadowed
festering global trade concerns”, said analysts at the Charles Schwab
brokerage.
– Calmer nerves –
Earlier, most Asian stock markets rose, extending recent gains as analysts
said optimism over the improving US economy was helping overcome worries
about a possible trade war and geopolitical uncertainty.
“Politics has calmed down for now, and so have investors’ nerves,” noted
CMC Markets UK analyst David Madden.
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“The trade talks between the US and China have not progressed much, but
more importantly, there has not been an escalation in tensions.”
London’s benchmark FTSE 100 index fell with investor concerns centred on
the banking sector.
“Bank stocks have weighed heavily on the FTSE, led of course by RBS as the
government looks to cut and run from some of its stake,” said IG analyst
Chris Beauchamp.
Britain on Tuesday said it had sold a small chunk of state-rescued Royal
Bank of Scotland for more than o2.5 billion ($3.3 billion, 2.8 billion
euros).
Shares in RBS slid around five percent.
The 7.7-percent stake sale in RBS still leaves the government with a
majority of 62.4 percent.
“The sale hardly removes the crushing hand of state ownership,” noted
Beauchamp.
The Edinburgh-based lender underwent the world’s biggest bailout by
taxpayers at the height of the global financial crisis a decade ago.
The FTSE was also dented by strong services data which sent the pound
higher, hurting the share prices of multinationals whose earnings are in
dollars.
Attention this week turns to the Group of Seven summit that begins Friday
in Quebec, where Donald Trump is expected to face criticism over his decision
to lump tariffs on Canadian, Mexican and European steel and aluminium.
The EU and Canada have filed complaints at the World Trade Organization
while China has also issued a warning to Washington not to target its
exports.
While there are concerns about the impact a trade war would have on the
global economy, analysts say trading floors remain broadly upbeat.
Oil prices meanwhile diverged with dealers on edge before a June 22 OPEC
meeting where the cartel will discuss its two-year-old output cap deal with
Russia, with Saudi Arabia having indicated it could open the pumps more.
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