Stock Market News (European Open) – Sea of red in both Asia and Europe; energy stocks hurt on declining oil – XM (blog)

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Andreas Georgiou, XM Investment Research Desk

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Major Asian indices extended yesterday’s decline during today’s trading with some of them recording sizable losses. In Japan, The Nikkei 225 and the Topix fell by 1.6% and 2.0% respectively, further distancing themselves from last week’s multi-decade high closes. The Topix, which more broadly gauges Japanese equity performance, slid for the fifth straight day for the first time since September 2016 while posting its sharpest fall since March. Hong Kong’s Hang Seng lost 1.0% and the Shanghai Composite finished lower by 0.8%. Australia’s S&P/ASX 200 closed 0.6% down.

Japanese GDP figures released during the Asian session showed the economy expanding for the seventh straight quarter, the longest such stretch since the period between Q2 1999 and Q1 2001 during which the Japanese economy grew for eight straight quarters. Annualized growth numbers came in at 1.4%, slightly above expectations for a growth rate of 1.3%. Still, economic activity slowed down relative to the preceding quarter.

Dollar/yen has been weakening, touching 112.75 at its lowest in today’s trading, a level last seen on October 20. This sets a negative backdrop for exporter-heavy Japanese benchmarks such as the Topix and the Nikkei 225.

The fall in commodities has hurt stocks dependent on them for their revenues, pushing benchmarks lower. WTI and Brent crude last traded down on the day by around 0.9%, building on yesterday’s sharp losses. A report by the International Energy Agency cut demand projections and warned of an oversupplied market. 

In Europe, the picture was also negative in early trading. At 0913 GMT, the pan-European Stoxx 600 was lower by 0.6% and the blue-chip Euro Stoxx 50 down by the same proportion. The Stoxx 600 is on its fourth straight daily decline. At its lowest today, it touched 381.47, a level last experienced during late September.

All but one Stoxx 600 industry sector (telecommunication services) were in negative territory with energy being the one deepest in losses.

The UK’s FTSE 100, German DAX and French CAC 40 all traded lower by 0.5%, 0.8% and 0.4% respectively.

A stronger euro following, among others, yesterday’s positive growth data out of Germany is perhaps acting as a drag on export-reliant benchmarks such as the DAX. Euro/dollar last traded at its highest since late October, above the 1.18 handle.

Despite weakening metal prices and the fall in commodities, miner Fresnillo (up 3.1%) topped gains in the FTSE while making the list of top-10 performers within the Stoxx 600 after HSBC upgraded the stock to “buy” from “hold”. However, the bank also cut its price target on the company’s stock.

Other FTSE miners were on the decline. Glencore, Anglo American, Rio Tinto, BHP Billiton and Antofagasta all made the top-10 list of worst performing stocks within the UK’s blue-chip index. Their losses ranged from 2.5% to 1.7% in the order written.

Airbus (up 3.0%) outperformed within the Stoxx 600 while leading gains in the CAC 40 after US investor Indigo Partners placed a massive order with the company for jets worth nearly $50 billion, while it was just announced that Flydubai placed an order with a value of around $27bn. The Dubai-based airline also purchased the option to extend its order (i.e. purchase more jets than the agreed 175 Boeing 737 Max jets).

Major Wall Street benchmarks had a down day during yesterday’s trading with discussions on overvalued equities heating up after a recent survey conducted by Bank of America Merrill Lynch showed a record number of global money managers sharing that view. General Electric (down 5.9%) weighted on the Dow Jones and the S&P 500 for the second consecutive session as investors are wary on whether the conglomerate’s new CEO plans to turn the firm around will succeed.

The US will today see the release of October inflation and retail sales data with the US House potentially voting on its version of the tax-cut bill by Thursday.

Dow, S&P 500 and Nasdaq 100 futures were all pointing to a lower open on Wall Street with losses ranging from 0.4% to 0.5%.