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European stocks edge higher though RBS sale hurts London

Jun 05 2018 16:34

Key eurozone stock markets posted gains on Tuesday over easing trade and political fears while London sank as the British government sold a chunk of Royal Bank of Scotland at a sizeable loss, dealers said.

Frankfurt and Paris were higher as political worries subsided somewhat in both Italy and Spain, but Milan remained under pressure after Italy's new leader appeared to question eurozone debt rules.

Prime Minister Giuseppe Conte on Tuesday declared that his eurosceptic government wanted to reduce the country's huge public debt "through growth", not austerity, as he made his first speech to the Italian Senate.

Wall Street opened steady after a two-day rally fuelled by positive economic news which "has relatively overshadowed festering global trade concerns", said analysts at the Charles Schwab brokerage.

Calmer nerves

Earlier, most Asian stock markets rose, extending recent gains as analysts said optimism over the improving US economy was helping overcome worries about a possible trade war and geopolitical uncertainty.

"Politics has calmed down for now, and so have investors' nerves," noted CMC Markets UK analyst David Madden.

"The trade talks between the US and China have not progressed much, but more importantly, there has not been an escalation in tensions."

London's benchmark FTSE 100 index fell with investor concerns centred on the banking sector.

"While European markets move higher once more, UK news has kept the FTSE 100 from joining in the fun," said IG analyst Chris Beauchamp.

"Bank stocks have weighed heavily on the FTSE, led of course by RBS as the government looks to cut and run from some of its stake."

Britain on Tuesday said it had sold a small chunk of state-rescued Royal Bank of Scotland for more than $3.3bn.

Shares in RBS slid nearly 5%.

The 7.7% stake sale in RBS still leaves the government with a majority of 62.4%.

"The sale hardly removes the crushing hand of state ownership," noted Beauchamp.

The Edinburgh-based lender underwent the world's biggest bailout by taxpayers at the height of the global financial crisis a decade ago.

The FTSE was also dented by strong services data which sent the pound higher, hurting the share prices of multinationals whose earnings are in dollars.

Attention this week turns to the Group of Seven summit that begins Friday in Quebec, where Donald Trump is expected to face criticism over his decision to lump tariffs on Canadian, Mexican and European steel and aluminium.

The EU and Canada have filed complaints at the World Trade Organisation while China has also issued a warning to Washington not to target its exports.

While there are concerns about the impact a trade war would have on the global economy, analysts say trading floors remain broadly upbeat.

Oil prices meanwhile dipped with dealers on edge before a June 22 OPEC meeting where the cartel will discuss its two-year-old output cap deal with Russia, with Saudi Arabia having indicated it could open the pumps more.

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european markets  |  equities  |  markets


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