Monday 16 July 2018

Car manufacturers among stocks hit again by China

A Hyundai assembly plant in Alabama.
A Hyundai assembly plant in Alabama.

A slump in car manufacturers and consumer-goods companies led European stocks to their biggest decline in two weeks as China's currency devaluation ignited concern over the global economy.

By mid-afternoon in Dublin yesterday, the ISEQ Overall Index was down 2.47pc or 162.01 points to 6,389.88.

The leaders on the Dublin index by mid-afternoon included Dalata Hotel Group, which increased 1.5pc to €4.10, while insurance group FBD was down 0.4pc to €6.83.

On the other side of the board, the laggards included packaging giant Smurfit Kappa, down 3.8pc to €26.30 and building materials group CRH, which had fallen 3.9pc to €26.45.

Elsewhere, the Stoxx 600 retreated 2.1pc to 385.56 at 1:06pm in London, taking its two-day drop to 3.6pc, the most since the end of June.

France's CAC 40 Index slipped 2.5pc, as Valeo, Peugeot and LVMH Moet Hennessy Louis Vuitton fell at least 3.9pc. Germany's DAX Index lost 2.3pc.

"Euro stocks have two strong winds pushing against them: the Chinese consumer is going to be hiding behind the weaker yuan, and stocks are selling in sympathy to the expected lack of exports," said Daniel Weston, chief investment officer of Aimed Capital in Munich.

"The pressure on the French market is linked to the consumer and luxury markets; the demand expectation from China is having a big rethink." European luxury-goods sellers, carmakers and miners are emerging as the biggest losers after China's move. The volume of Stoxx 600 shares changing hands was 22pc greater than the 30-day average.

The surprise devaluation of the yuan sparked the biggest two-day selloff in Asian currencies since 1997. Industrial production, investment and retail data that trailed analysts' estimates put additional downward pressure on China's weakening currency.

Traders are now seeking safety in government debt amid reduced inflation expectations.

Among European stocks moving on corporate news, Henkel slid 7.3pc after the maker of Schwarzkopf shampoo reported second-quarter earnings that fell short of analyst estimates.

Geberit AG lost 5.3pc after the Swiss manufacturer of bathroom piping posted worse-than-forecast sales and said the outlook for the construction industry remains challenging.

China's surprise devaluation is proving a boon for the euro.

The 19-nation currency advanced versus most of its major peers for a second day as investors fleeing China-exposed markets from Australia to Mexico unwound bets against it.

The euro overtook the dollar yesterday as the refuge of choice on concern Chinese policy imperils the timing and path of rate increases from the Federal Reserve. (Agencies)

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