European Shares Slip Amid Dollar Weakness and Middling Growth Figures -- 2nd Update
July 24 2017 - 6:02AM
Dow Jones News
By Mike Bird and Kenan Machado
European stocks dipped slightly in early trading Monday as the
weakness of the U.S. dollar continued to affect global markets.
The Stoxx Europe 600 index was down by around 0.4% in midmorning
trading, weighed down by a 0.9% fall in Britain's FTSE 100 and a
0.4% drop in Germany's DAX.
Fresh economic data for the eurozone on Monday suggested the
economy grew slightly more slowly than analysts had expected during
July. The IHS Markit flash purchasing managers index, a key
business survey, came in at 55.8. That is lower than the 56.2
analysts had expected, and a six-month low for the index. Any
figure above 50 indicates an economy is growing.
Shares of major European auto makers were among the hardest hit
on Monday, after the European Commission's confirmation that it is
assessing accusations of coordination efforts by rival companies to
manipulate diesel engines to reduce emissions.
Shares in Volkswagen, Daimler AG and BMW fell by 2.7%, 3.3% and
2.3% respectively.
In foreign-exchange markets, the euro touched its highest
intraday level since January 2015 during the early Asian trading
session Monday, above $1.168. The dollar fell 0.13% to 110.8
against the Japanese yen.
On Friday, the WSJ Dollar Index reached its lowest close since
Sept. 30, down 6.92% since the beginning of the year. The index was
down another 0.1% on Monday.
Concern about policy direction from the White House and Capitol
Hill since the failure to repeal the Affordable Care Act and
investigations into contacts with Russians before November's
election have helped fuel dollar selling.
Sentiment on the dollar will stay negative until there is a
string of upbeat U.S. economic data along with a hawkish Federal
Reserve and a dovish European Central Bank, said Kay Van-Petersen,
a macro strategist at Saxo Bank in Singapore. The Fed is scheduled
to meet this week.
A stronger euro has knock-on effects for the European economy
and can weigh on earnings expectations for export-oriented
firms.
"If the euro remains at or above current levels, it is likely
increasingly to have a bearing on the euro area economic outlook,
weighing somewhat on GDP growth via net trade," said Chris
Scicluna, head of economic research at Daiwa Capital Markets
Europe.
Oil prices were slightly lower Monday as the Organization of the
Petroleum Exporting Countries continued to grapple with the growing
challenges to removing what it sees as a global oversupply of oil
from the market.
Despite a deal struck last year to take out almost 1.8 million
barrels of crude oil from the global market, prices remain
stubbornly low. West Texas Intermediate crude oil for delivery in
September fell 0.3% to $45.64 per barrel Monday.
The Nikkei closed 0.6% lower on Monday. Among the biggest stock
decliners in Japan were export-reliant companies, as is often the
case when the yen strengthens, since that eats into such firms'
earnings.
Meanwhile, fresh declines in Japanese bond yields hit insurers,
which are heavy investors in fixed income. Dai-ichi Life and
T&D Holdings slid more than 1.7%.
Beyond Japan, most indexes moved little from Friday's closing
levels, though the Chinese startup-heavy ChiNext index in Shenzhen
fell 0.2% amid continued regulatory worries.
Hong Kong's Hang Seng Index, however, rose 0.5% after its
nine-session winning streak ended Friday. Developer stocks gained,
with Sunac China, Times Property and Yuzhou Properties hitting
fresh record highs as Sunac's chairman said cash flow remained the
firm's priority amid a Beijing-directed scrutiny.
Write to Mike Bird at Mike.Bird@wsj.com and Kenan Machado at
kenan.machado@wsj.com
(END) Dow Jones Newswires
July 24, 2017 05:47 ET (09:47 GMT)
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