Europe close: Selling abates but stocks still end lower


Europe close: Selling abates but stocks still end lower

Thu, 18 May 2017
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Europe close: Selling abates but stocks still end lower

(ShareCast News) - Stocks on the Continent ended the day mostly lower but off their worst levels of the session even as investors reassesed the investment landscape following recent events in Washington.
"As we suggested in April the Trump reflation trade appears to be in trouble with a big decline in the US dollar in recent days, which may affect any decision in June by the US Federal Reserve about interest rate policy over the rest of the year.

"Financial markets are still pricing a rate rise in June, and while that still remains a likely scenario it's not the done deal markets thought it was a week ago, given the risk reassessment being seen amongst investors in response to events of the last 24 hours," said Michael Hewson, chief market analyst at CMC Markets UK.

At the closing bell, the Stoxx 600 was down by 0.50% to 389.19, alongside a drop of 0.33% for Germany's Dax to 12,590.06 even as the FTSE Mibtel edged higher by 0.07% to 21,229.26.

The euro still on the backfoot, giving back a little of the previous day's advance as traders recovered their balance following Wednesday's bout of selling. Euro/dollar was trading down by 0.28% to 1.1135.

A widely-followed gauge of volatility in equities closed higher as investors bought protection against downside risks, but finished its worst levels too.

The VStoxx index of volatility for the Eurostoxx 50 ended up by 5.78% to 17.08.

Nevertheless, Oren Klachkin at Oxford Economics told clients that: "increased congressional attention on the administration's interactions with Russia and the FBI puts Congress' fiscal stimulus agenda at risk. In the near-term, this will lead to some market repricing of the expected Trump "bump" to the US economy. However, the greater risk for markets and the economy is that this leads to an impeachment process."

Unemployment in France was steady at 9.6% during the first quarter of 2017 on an ILO basis, according to INSEE.

Still on the economic calendar for later on Thursday, were initial weekly US unemployment claims figures due out at 1330 BST, alongside the Philly Fed's manufacturing sector gauge for May and the Conference Board's index of leading economic indicators for the month of April at 1500 BST.

Drug-maker Merck finished lower even after reporting a 14.5% jump in core earnings for the first three months of the year.

Spain's incumbent telecoms operator Telefonica was lower despite analysts at Goldman Sachs having raised their target price on the shares of €11.6, up from €9.90 previously.

A sharp drop in the Brazilian real amid media reports that the country's president Michel Temer may have bribed a key opposition politician weighed on the likes of Telefonica, Corporacion Mapfre and Banco Santander.