Portfolio

Europe close: Stocks slip on geopolitical concerns

By Alexander Bueso

Date: Friday 14 Jun 2019

Europe close: Stocks slip on geopolitical concerns

(Sharecast News) - Stocks finished the week on a down note, weighed down by a spate of mixed readings on the Chinese economy for the month of May and amid heightened tensions in the Persian Gulf.
"Despite the head-turning events in the Middle East, the relationship between China and the US remains the key determinant of market movement given its knock-on effect on global trade and growth," said IG's Chris Beauchamp.

Indeed, Beauchamp and some other analysts appeared to be hopeful that improved US-China trade relations were possible.

For their part, strategists at Bank of America-Merrill Lynch said they believed that while the US technology war was "secular", the trade war was "potentially cyclical".

By the end of trading, the benchmark Stoxx 600 was down 0.40% at 378.81, alongside a drop of 0.60% to 12,096.40 for the German Dax, while the Cac-40 was off by 0.15% to 5,367.62.

Basic Resources firms were weaker on the back of the news out of China, with the corresponding Stoxx 600 sector gauge off by 0.87% to 445.34, albeit well of their lows of the session.

Technology shares on the other hand ended the day near their worst levels, with the Stoxx 600 sector gauge down 1.78% at 464.49 after US chipmaker Broadcom walked back on a previous forecast for a rebound in demand during the second half of 2019, citing concerns around international trade and the ban on trading with Huawei.

Data out of China overnight had revealed weaker-than-expected prints for industrial production and fixed asset investment in May, with the former printing at up by 5.0% year-on-year in May, versus a consensus estimate for an increase of 5.4%, and the latter at 5.6% versus the 6.1% anticipated.

Nonetheless, commenting on the FAI figures, Freya Beamish at Pantheon Macroeconomics said: "More positively, secondary industry investment growth ticked up. That won't last in the current trade environment, but we expect an improvement in international trade relations soon."

Retail sales in China on the other hand grew at a year-on-year pace of 8.6% in May (consensus: 8.1%), following a rise of 7.2% in April.

Also overnight, the US accused Iran of being complicit in the previous day's attacks on two more tankers in the Persian Gulf.

Brent crude oil futures rose on Friday, adding 1.21% to $62.05 per barrel on the ICE on the back of concerns around the global demand picture.

Reflecting those concerns, in its latest monthly report, the Energy Information Administration cut its forecast for global demand growth in 2019 by 100,000 barrels a day to 1.2m b/d.

The August gold futures contract on COMEX climbed 0.61% to $1,351.90/oz..

On the corporate side of things, stock in Bayer slipped after the chemicals maker announced plans to invest roughly €5.0bn to develop alternatives to the Roundup weedkiller it acquired after its purchase of US rival Monsanto; however, a company spokesman said those funds did not represent new spending.

As expected, the Russian central bank lowered its one-week repo rate by 25 basis points to 7.50%.

The US dollar slipped to 64.3850 versus the Russian rouble following the move.

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