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Europe stocks stall as trading drops, metals slide

Mar 07 2017 13:16
Bloomberg: Samuel Potter

London - European stocks drifted, setting the tone for global equities as investors decide whether a recent rally is correcting or merely taking a break. Basic metals continued to slide.

The Stoxx Europe 600 Index edged lower for a fourth day, as the region’s utility companies retreated while mining shares bounced. Trading volumes were 18% below the intraday average of the past 30 days.

Futures for the S&P 500 also slipped following a drop in US equities on Monday, when JPMorgan warned that hawkish Federal Reserve rhetoric has increased the chances of a short-term pullback. Copper, iron ore and zinc paced the retreat in metals.

Bets the global economy is strong enough to withstand rising borrowing costs helped stoke stock gauges to records globally last week, even as a U.S. interest rate hike this month seemed to become a near certainty. With valuations on the S&P 500 near the highest since 2002 and after the longest weekly rally in 16 months, investors now seem to be waiting for a fresh catalyst.

“Financial market sentiment behaves like a boat tacking into a moderate headwind. Progress is being made, albeit choppily,” Kit Juckes, a London-based global strategist at Societe Generale SA, wrote in a note. “The headwind, of course, is the Fed, and the painfully slow grind higher in rates, especially 10-year Treasury yields.”

What’s ahead for the markets:

Mario Draghi probably won’t flinch at Thursday’s ECB meeting even after headline inflation reached its 2% target in February. He’s expected to keep QE going until the end of the year with underlying price pressures muted. 

US jobs data for February are due on Friday. Employers probably added around 190 000 workers to payrolls, in line with the average over the past six months and a sign of steady job growth, economists forecast. Philip Hammond’s UK budget arrives on Wednesday. The chancellor pledged on Sunday to set aside money to cushion the economy from Brexit. 

Here are the main moves in markets:

Stocks

The Stoxx Europe 600 fell 0.1% as of 13:03, after a 0.5% drop on Monday. Futures on the S&P 500 declined 0.2%, after the benchmark index lost 0.3% on Monday. The index has gained 6.1% in 2017.

Currencies

The British pound dropped 0.3% to 1.2197 versus the dollar to touch a seven-week low. The Bloomberg Dollar Spot Index stood little changed while the euro fell less than 0.1% to $1.0572. Former French Prime Minister Alain Juppe said he won’t enter the race for the presidency, reducing the chances of anti-euro candidate Marine Le Pen being eliminated in the first round of voting.

Bonds

Yields on 10-year Treasuries fell 1 basis point to 2.49% after climbing two basis points on Monday.

Commodities

West Texas Intermediate crude rose 0.2% to $53.32 a barrel. Iraq said it was ready to cut production in the second half of this year if OPEC decides to extend a policy limiting output in an attempt to balance a global oversupply.

Spot gold was little changed at $1 225.25 an ounce after dropping 0.8% in the previous session. Copper dropped 0.7% to $5 818.50 an ounce, zinc lost 1.1%.

Asia

The Aussie dollar rose with stocks in Sydney as the Reserve Bank of Australia kept rates at a record low. Hong Kong-listed Chinese shares paced gains in Asia, where trading volumes were down across most of the region.

Read Fin24's top stories trending on Twitter:

european markets  |  equities  |  markets
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