Friday 24 November 2017

End of US stimulus plan sends Euro shares south

EUROPEAN shares fell this morning as confirmation that the US Federal Reserve would wind down economic stimulus measures, together with weak Chinese data, hit investor sentiment.

 

The pan-European FTSEurofirst 300 index, which raced to a 5-1/2 year high last month, was down by 1.5pc at 1,162.19 points by 0705 GMT, while the euro zone's blue-chip Euro STOXX 50 index fell 2pc to 2,631.88 points.

Mining stocks dominated the losers’ board, falling on fresh signs of a slowdown in China - the world's biggest metals consumer - while Swiss luxury goods stocks Swatch and Richemont also fell which traders attributed to data showing a fall in Swiss exports.

Global equity markets have fallen back from multi-year highs over the last month as expectations have mounted that US Federal Reserve head Ben Bernanke will soon wind down an economic stimulus programme known as "quantitative easing" (QE).

The programme has hit returns on bonds and thereby driven many investors over to the better returns on offer from equities, but Bernanke said yesterday that the Fed was likely to wind down this programme later this year.

Also weighing on markets was data showing fresh signs of a slowdown in China.

"I think the weak Chinese data is a big play here, along with the Fed's comments," said Darren Courtney-Cook, head of trading at Central Markets Investment Management.

Courtney-Cook said he had bought "put" options on Germany's DAX that were due to mature in July with a strike price of 8,000 points - implying a fall of over 2pc on that index over the next month.

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