Thursday 18 January 2018

European stocks fall back on US monetary policy fears

Traders work on the floor of the New York Stock Exchange (NYSE)
Traders work on the floor of the New York Stock Exchange (NYSE)

European stocks retreated for a second day by mid-afternoon yesterday.

The fall came amid investor concern about corporate earnings against the backdrop of an expected tightening of US monetary policy.

The Stoxx 600 fell 0.3pc to 339.13 at 2:37pm in London. Investors were watching this earnings season for indications of the health of corporate Europe, with analysts forecasting a 4.2pc contraction in annual profit.

The FTSE 100 Index, which touched an intraday record on Tuesday, lost 0.3pc yesterday as the pound rebounded. "Everyone is looking at what's still coming up in 2016, not wanting to take a huge amount of risk and preserving as much capital as possible," said Alan Higgins, chief investment officer at Coutts & Co in London.

European stocks have had a rocky start to October, a month in which they have advanced in five of the past six years. Monday's rebound on oil proved short lived, as concerns resurfaced about corporate earnings and whether the US economy is sufficiently robust to cope with higher interest rates.

The Stoxx 600 fell in four of the past five weeks as traders predicted that the Fed will hike borrowing costs before the end of the year amid encouraging economic data. The odds of an increase in December stand at about 67pc, up from about 50pc two weeks ago. Concerns over how much central banks are willing to support economic growth were exacerbated last week by a report that European policy makers have held discussions on the best way to taper quantitative easing.

Fluctuating oil prices have also played a part in the Stoxx600's oscillations. Russia and Opec are meeting to discuss an output pact. Supply and demand will come back into balance earlier than expected if the move to trim output is implemented, the International Energy Agency said.

Fiat Chrysler Automobiles slipped 1.9pc after people familiar with the matter said that talks with Samsung about a partnership with the carmaker's parts unit have stalled because the Korean company is focused on resolving the Galaxy Note 7 smartphone crisis.

On the Iseq overall index of Irish shares, Permanent Tsb shares rose by 4.1pc, while hospitality supplier Total Produce gained 2.7pc. The day's laggards were Origin Enterprises - down 2.5pc - and insurance group FBD which lost 2.1pc. The index was down by 0.41pc in mid-afternoon at 5833.08.

Oil and gas explorer PetroNeft Resources was up just over 12pc in London trading by mid-afternoon after it provided an update on oil production in western Siberia.

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