Monday 23 April 2018

Japanese caution sends Euro shares lower

Toni Vorobyova

European shares edged lower this morning, pressured by concerns that the era of plentiful monetary stimulus is coming to an end after the Bank of Japan decided against unveiling fresh measures overnight.

 

The BoJ's unchanged policy disappointed markets. Some investors had been expecting an extension to the maximum duration of cheap fixed-rates funds.

The European Central Bank said last week it saw no need for further stimulus at the moment, and Federal Reserve officials are openly discussing when would be the best time to start trimming the US asset purchase programme.

The pan-European FTSEurofirst 300 index, which has shed 5pc in the past 12 sessions, fell a further 0.8pc on Tuesday to 1,184.32 points at 0742 GMT.

The EuroSTOXX 50 index of euro zone bluechips fell 0.9pc to 2,696.23 points, taking it below a support level.

Analysts said that, with the market still more than a fifth higher than it was a year ago despite relatively little improvement in economic fundamentals or earnings, more weakness could follow.

"Given the lack of action from Japan overnight, that just serves to highlight how the markets are highly dependent on central banks," said Ioan Smith, strategist at Knight Capital.

"... Everybody is trying to front-run it and they are aware that there is only a small window to get out of these trades. It depends on what happens during the summer, but it wouldn't be unhealthy to see a correction of between 5 and 10pc now."

The EuroSTOXX 50 fell below technical support around the 60-day moving average around 2,707.88 points, which had acted as a floor during bouts of weakness the previous session, and on to test the 50pc retracement of the mid-April to mid-May rally, around 2,696.55 points.

Among individual stocks, French electrical equipment company Legrand and German B2B marketing specialist Takkt were both hit by news of shareholders planning to sell stakes. Shares in the two companies fell 3.6 and 6.7pc, respectively.

 

Reuters

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