EUROPE MARKETS: European Stocks Step Back From 5-week High, As Italian Shares Sliding
December 13 2017 - 11:26AM
Dow Jones News
By Carla Mozee, MarketWatch
Analyst: It's a typical low-volume lead up on a Fed-decision
day
European stocks pulled back from a five-week high Wednesday,
with investors bracing for an expected hike in borrowing costs by
the Federal Reserve, while retail shares were showing strength.
Italian stocks fared the worst in the region as the country
begins to gear up for a national election next year.
How markets are moving: The Stoxx Europe 600 index was down 0.1%
to 391.43. Utility, oil and gas and telecom shares were among those
losing ground. But tech, consumer services, basic material and
financial shares gained. On Tuesday, the benchmark climbed 0.7%
(http://www.marketwatch.com/story/european-stocks-edge-slightly-higher-as-oil-shares-charge-up-2017-12-12)
for its highest close since Nov. 8, according to FactSet data.
Among national indexes, Italy's FTSE MIB was hit the hardest as
it slid 1.4% to 22,415.10.
In Frankfurt, the DAX 30 index fell 0.3% to 13,141.18, and in
Paris, the CAC 40 was off 0.5% at 5,398.60.
In Madrid, the IBEX 35 was up 0.1% at 10,294.30. In London, the
FTSE 100 was up about 0.1% at 7,506.99.
"European stock markets opened mixed on Wednesday, supported by
some well-received corporate results but weighed down by caution
ahead of the Federal Reserve interest-rate decision. It's a
typically low-[volume] lead up to the Federal Open Market
Committee," meeting later Wednesday, said Jasper Lawler, head of
research at London Capital Group, in a note.
The euro traded at $1.1762, up from $1.1743 late Tuesday in New
York.
What's moving markets: Markets have essentially priced in an
announcement of a quarter-percentage-point interest-rate hike by
the U.S. central bank.
But there are still questions about how many more rate increases
will come from the Fed, especially as its moves influence prices
for a range of assets. Outgoing Fed Chairwoman Janet Yellen will
hold a news conference at the conclusion of the bank's two-day
meeting. The decision is due at 7 p.m. London time, or 2 p.m.
Eastern. Yellen's conference is scheduled for 2:30 p.m.
Eastern.
Meanwhile, the European Central Bank and the Bank of England
will issue policy decision on Thursday, with investors eager to
hear more on their thinking on inflation and economic growth. In
the U.K., consumer-price inflation has reached 3.1%, more than a
percentage point higher than the central bank's target.
Italy: Italian stocks as well as bond prices were knocked lower
after Italian officials said a general election will be held on
March 4. As bond prices dropped, the yield on Italy's 10-year bond
surged 8 basis points to 1.784%, according to Tradeweb.
Brown Brothers Harriman in a note said polls suggest a close
race between Italy's main political forces. The three are the
center-right Forza Italia party led by former Italian Prime
Minister Silvio Berlusconi, the euroskeptic 5 Star Movement, and
the governing center-left Democratic Party.
"However, no party or block is drawing more than 40% of the
vote, and this warns that perhaps the new electoral law has not
gone far enough to ensure a more stable government," said currency
strategists at Brown Brothers Harriman led by Marc Chandler.
If "the Italian election will not lead to a decision to leave
the European Union or the Economic and Monetary, then what may
appear as the overreaction by investors may create a new buying
opportunity," said BBH. "In the near-term, however, Italian assets
are likely to give back some the outperformance seen earlier this
year."
Stock movers: Italian bank stocks posted some of the biggest
losses Wednesday. Unione di Banche Italiane SpA (UBI.MI) dropped
5.1%, Banco BPM SpA (BAMI.MI) lost 5.8% and UniCredit SpA (UCG.MI)
fell 4%.
Inditex (ITX.MC) gained 2.2% after the parent company of apparel
retailer Zara said the winter sales season got off to a more robust
start than anticipated
(http://www.marketwatch.com/story/inditex-shares-up-even-as-profit-margins-shrink-2017-12-13),
with revenue rising 6% in the nine-month period. But profit margins
remain under pressure.
NCC AB shares (NCC-A.SK) tumbled 8.6% as the Swedish
construction company said it's raising provisions in construction
and civil-engineering projects during the fourth quarter and warned
that operating profit "is expected to be close to zero."
Dixons Carphone PLC shares (DC.LN) jumped 6.7%% as the
electronics retailer said it logged record Black Friday sales
(http://www.marketwatch.com/story/dixons-carphone-tackling-mobiles-unit-performance-2017-12-13)
and that it's working on addressing issues at its mobile
division.
Innogy SE shares (IGY.XE) sank 12%, with the Germany energy
company citing a difficult retail energy market in the U.K. as
reason it's cutting its forecasts for 2017 and 2018. Innogy runs
U.K. electricity and gas supplier nPower.
(END) Dow Jones Newswires
December 13, 2017 11:11 ET (16:11 GMT)
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