European stocks end lower; What is driving the market?
Europe’s main stock gauge gave up modest early gains to close slightly lower on Thursday, with the U.K. leading the way lower as the pound strengthened against a broadly weaker U.S. dollar.
What are markets doing?
The Stoxx Europe 600 edged 0.2% lower to end at 376.52, after Wednesday’s gain of 0.5%.
The pan-European gauge is showing a drop of 3.3% for the year to date.
Germany’s DAX 30 fell 0.2% to 12,055.55, while France’s CAC 40 declined 0.1% to 5,328.12. The U.K.’s FTSE 100 shed 0.4% to finish at 7,281.57.
The euro EURUSD, briefly traded above $1.17, up from $1.1627 late Wednesday in New York, while the pound GBPUSD, bought $1.3110, up from $1.3048. The dollar weakened after the U.S. consumer-price index for August showed a weaker-than-expected rise.
What is driving the market?
A selloff in energy and tobacco stocks put pressure on British stocks.
The European Central Bank and Bank of England both stood pat on interest rates, as expected. Turkey’s central bank hiked its one-week repo rate to 24% from 17.75% in a bid to stave off pressure on its currency. The lira USDTRY, responded with a sharp rally.
Investors also continued to track the trade-related tensions between the U.S. and China, the world’s two largest economies. There is some optimism after a report late Wednesday that the Trump administration is giving Beijing another chance to try to stave off new tariffs on $200 billion in Chinese exports. It’s asking for a fresh round of trade talks later this month.
In addition, European markets have been sensitive to Brexit-related news. The pound has been drawing buyers this week as traders become more optimistic that a deal on the U.K.’s exit from the European Union could be reached soon. It’s up 1% against the dollar so far this week.
What are strategists saying?
“The FTSE 100 is underperforming the rest of Europe as a selloff in tobacco and oil stocks are weighing on the index,” said David Madden, market analyst at CMC Markets.
“Bond, stock and FX markets have all experienced some big moves today on the back of a deluge of central bank meetings and some weak U.S. economic data, which weighed heavily on the dollar,” said Kathleen Brooks, research director at Capital Index, in a note. “The question now is whether today’s events will prove to be a watershed moment for markets with the pound making its long overdue recovery, the Turkish lira spurring a broad-based recovery in the EM FX space, and if the dollar has had its moment in the sun?”
Shares of British American Tobacco PLC down 1.9%, and Imperial Brands PLC down 2.5%, gave back some of the gains scored a day earlier. Tobacco stocks jumped Wednesday after the head of the Food and Drug Administration said the agency could ban all flavored e-cigarettes due to their popularity among teenagers.
Shares in Natixis jumped 3.1% after the French bank raised its guidance and said it was planning the sale of retail businesses.
On the downside, Delivery Hero AG’s stock fell more than 3% after the food-ordering company posted first-half results.