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European stock markets set to end bruising week on positive note

Aug 03 2018 14:42

European equities rebounded on Friday after a tumultuous week, whose hallmark was fear over bubbling US-China trade tensions.

London stocks climbed 0.6%, having sunk 1.0% on Thursday after the Bank of England (BoE)  lifted UK interest rates by a quarter-point to 0.75% - and indicated it stood ready to act again amid Brexit uncertainty.

Sentiment on Friday was boosted by the weaker pound, which sank after BoE Governor Mark Carney warned that the possibility of a no-deal Brexit deal with Brussels was "uncomfortably high" and "highly undesirable".

"The possibility of a no-deal is uncomfortably high at this point," Carney told BBC radio.

A weaker pound tends to lift the share prices of London-listed multinational, because they derive much of their earnings in dollars.

In eurozone deals on Friday, Frankfurt and Paris gained 0.5% and 0.3% respectively, having nursed sizeable losses the previous day.

Brexit clouds UK outlook

"European markets have kicked off their final trading day of the week in positive fashion, with the deterioration in European currencies expected to drive an outperformance of European stocks over their US counterparts," noted IG analyst Joshua Mahony.

"Despite Mark Carney's insistence that the BoE remains ready to raise rates again in the future, his declaration that there is an uncomfortably high risk of a no-deal Brexit highlights the significant clouds that continue to loom over the UK economy."

Attention now shifts to the release later on Friday of US jobs data, which will provide the latest snapshot of the US economy and give an idea about the Federal Reserve's plans for its future interest rate hikes.

Asian indices traded mixed after another painful week as fears of an all-out trade war between Beijing and Washington keep investors on edge, while China's stock market was toppled by Japan as the world's number two.

Apple provided a boost for Wall Street after hitting the $1trn market capitalisation mark.

However, the prospect of the world's top two economies exchanging painful tariffs on hundreds of billions of dollars of goods is stunting optimism.

Shares, which have been on the slide for several weeks owing to the increasingly heated trade row, took another hit this week when the White House said it was considering more than doubling threatened tariffs on $200bn of Chinese imports.

Beijing responded by saying it would not give in to "blackmail".

 China ranking drop

Adding to the pain of recent losses, China's stock market was overtaken as the world's second-biggest by Japan's on Thursday, having been hit by trade war fears and slowing economic growth.

Bloomberg News figures showed Chinese stocks were worth $6.09trn, compared with $6.17trn in Japan. The US market is worth $31trn.

"Investors are paying attention to government policies as the US-China trade war will remain uncertain for now," Yoshihiro Okumura, general manager at Chibagin Asset Management, told AFP in Tokyo.

"On the other hand, Japanese companies are showing strong results in general, sustaining share prices on the Tokyo Stock Exchange."

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european markets  |  equities  |  markets
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