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European stocks succumb to Wall Street downturn

Published on April 08, 2019

European stock markets gave up early gains on Monday to close mostly lower, dragged down by US markets worried about trade talks and the upcoming earnings season, analysts said.

The British pound was volatile as investors weighed the risks of another Brexit-themed week, with many willing to bet money on another, perhaps long extension to proceedings, while others think a hard crash out of the EU is not off the table.

In stock trading, Frankfurt came under pressure from the get-go after poor German data, and other eurozone equity markets soon followed suit, feeling the pressure from negative sentiment across the Atlantic.

“US stocks are lower in early action, with the markets seeming to look past Friday’s upbeat labor report and focus on uncertainty regarding a US-China trade deal and this week’s unofficial start to Q1 earnings season,” analysts at the Charles Schwab brokerage said.

Dow member Boeing fell nearly four percent after slashing its production schedule for the embattled 737 line from 52 planes per month to 42 following the grounding of the 737 MAX after two crashes.

London, however, managed to eke out a small closing gain as the pound pulled back from the day’s highs.

– ‘Sagging’ German numbers –

German data showing falling imports and exports in February spoiled the Monday mood in the eurozone and added to concerns about the health of the eurozone’s biggest, and heavily trade-dependent, economy.

German imports fell 1.6 percent month-on-month to 92.3 billion euros ($103.6 billion) while exports dropped 1.3 percent to 110.9 billion, federal statistics authority Destatis said.

IG analyst Joshua Mahony called the date “sagging” and said that “with both exports and imports falling for the European powerhouse, a worsening picture becomes apparent for the eurozone flagship economy”.

Asian indices traded mixed but investors remain broadly upbeat after a strong US jobs report that eased concerns about the world’s top economy.

– ‘Front and centre’ –

Sterling, meanwhile, held on to some of its early gains against the dollar, but lost ground against the euro as Brexit worries moved back into focus.

This week could be decisive for the currency “with Brexit once more at the front and centre of traders’ minds” said David Cheetham, an analyst at XTB.

“With the UK government asking for another extension… the most likely outcome seems to be that this will be granted by the other 27 EU members but the chances of a no-deal are creeping higher,” he said.

Prime Minister Theresa May is pressing ahead with her bid for a Brexit “compromise” with the opposition despite a backlash from her own party, as she attempts to prevent Britain crashing out of the European Union this week.

Talks with the Labour Party are expected ahead of a crucial EU summit on Wednesday that could see Britain leave the bloc as early as Friday, if no further delay is agreed.

Having failed three times to get her own withdrawal deal through parliament, May has been locked in talks with Labour to find a modified plan that could command a majority, causing anger within her own party.

May will also meet with German and French leaders Angela Merkel and Emmanuel Macron ahead of the EU summit.

In commodities, oil prices extended last week’s gains as an escalation of unrest in crude-rich Libya raised the prospect of a further tightening of supplies.

– Key figures around 1540 GMT –

London – FTSE 100: UP 0.1 percent at 7,451.89 points (close)

Frankfurt – DAX 30: DOWN 0.4 percent at 11,963.40 (close)

Paris – CAC 40: DOWN 0.1 percent at 5,471.78 (close)

EURO STOXX 50: DOWN 0.3 percent at 3,438.06

New York – Dow: DOWN 0.4 percent at 26,332.16

Pound/dollar: UP at $1.3045 from $1.3038 at 2100 GMT on Friday

Euro/pound: UP at 86.32 pence from 86.04 pence

Euro/dollar: UP at $1.1261 from $1.1216

Dollar/yen: DOWN at 111.45 yen from 111.73 yen

Tokyo – Nikkei 225: DOWN 0.2 percent at 21,761.65 (close)

Hong Kong – Hang Seng: UP 0.5 percent at 30,077.15 (close)

Shanghai – Composite: DOWN 0.1 percent at 3,244.81 (close)

Oil – Brent Crude: UP 45 cents at $70.79 per barrel

Oil – West Texas Intermediate: UP 85 cents at $63.93