U.S. Stocks Open Lower, Following Europe Down
July 09 2019 - 10:03AM
Dow Jones News
By Avantika Chilkoti
-- European stocks are dragged lower by a string of bad
corporate news
-- Most markets in Asia also decline
U.S. stocks opened lower on Tuesday, with declines in the Dow
Jones Industrial Average, the S&P 500 and the Nasdaq.
European stocks declined on Tuesday, following a spate of
unwelcome corporate news on some of the region's biggest banks,
chemical companies and auto makers.
The pan-continental Stoxx Europe 600 benchmark shed about 0.6%,
putting it on course to fall for a third straight day, with marquee
German stocks suffering some of the sharpest losses. U.S. stock
futures also dipped, while over in Asia, most markets declined
slightly, led by a 0.8% drop in Hong Kong's Hang Seng Index.
In Europe, the biggest decliners included BASF, which dropped
about 5% after the German chemicals giant slashed its profit
forecast on Monday evening, citing the continuing trade dispute
between the U.S. and China as well as sluggish demand in the auto
market. The warning prompted a drop in the stock of rivals such as
Covestro AG , which fell 4%, and Lanxess, which declined 1.5%.
"What's not clear is whether this is the start of a structural
downturn or whether it is a temporary blip," Martin Todd,
co-portfolio manager of the Hermes European Alpha Fund, said of the
European chemicals industry.
Deutsche Bank dropped 4.3%, extending its rout for a second day,
amid growing skepticism over Chief Executive Christian Sewing's
plan to cut jobs and restructure the investment bank. Smaller
Danish rival Danske Bank slumped about 3.2% after it published a
profit warning Monday.
There's widespread pessimism among investors about Europe, as
there's little room for the European Central Bank to cut rates
further, local banks are fragile and productivity gains have been
sluggish, according to Peter Westaway, chief European economist at
Vanguard. But Mr. Westaway says he encourages clients not to avoid
stocks in the region altogether.
"European equities are actually quite attractively priced
because there is so much bad news priced in and they probably
unperformed for the past few years compared to other markets," he
said. "The uncertainty has been removed but that still doesn't mean
there aren't people out there who are just skeptical about how
effective Q.E. can be," he said.
In a rare bright spot, shares in Ocado gained 9.4% in U.K.
trading after investors grew more optimistic about growth prospects
for the British online groceries group following its first-half
earnings report.
Meanwhile, stock futures linked to the S&P 500 index
declined 0.6%. The three main U.S. equity benchmarks, while still
hovering near record highs, have dropped for two consecutive days
after better-than-expected jobs data on Friday led investors to
speculate that the Federal Reserve may take it slow in easing key
interest rates.
Acacia Communications Inc. soared after Cisco Systems Inc.
Tuesday said it agreed to buy the company for $70 a share in cash,
or about $2.6 billion.
Inside currency markets, the pound slid 0.5% against the dollar.
It now trades at $1.2448 to GBP1, or close to the weakest level
since January, as investors digest disappointing economic data that
came out this week.
"The final leg of support for a Brexit riddled economy looks to
have been swiped away overnight as the BRC Sales Monitor points to
a third consecutive decline in official retail sales figures,
cementing the prospect of a negative Q2 GDP reading," Simon Harvey,
a currency market analyst at Monex Europe, said in a note to
clients.
Investors globally are also poised for fresh commentary from
U.S. Federal Reserve Chairman Jerome Powell and his deputy, Randal
Quarles, that may provide important signals on the chances of rate
cuts this year.
Pete Gunning, global chief investment officer at Russell
Investments, is among those investing carefully -- "thoughtfully
doing nothing," he said -- in anticipation of a global slowdown.
"While we are not expecting Armageddon, we are definitely late
cycle," he said.
The yield on 10-year Treasurys ticked up to 2.054% from 2.030%
on Monday. Yields and prices move in opposite directions.
Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com
(END) Dow Jones Newswires
July 09, 2019 09:48 ET (13:48 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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