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European shares fall as markets turn risk-averse; ECB in focus

Published 07/15/2020, 07:48 PM
Updated 07/16/2020, 07:11 AM
© Reuters. A man wearing protective face mask walks in front of a stock quotation board outside a brokerage in Tokyo

© Reuters. A man wearing protective face mask walks in front of a stock quotation board outside a brokerage in Tokyo

By Elizabeth Howcroft

LONDON (Reuters) - European shares opened lower on Thursday after Asian stocks faltered overnight, with risk appetite hit by deteriorating U.S.-China relations and worse-than-expected Chinese domestic consumption data.

The White House said on Wednesday it had not ruled out further sanctions on top Chinese officials to punish China for its handling of Hong Kong.

The United States also said it was studying the national security risks of social media applications including China's TikTok and WeChat.

Europe's STOXX 600 was down 0.9% at 0800 GMT and London's FTSE 100 also fell 0.9%, both partially erasing yesterday's gains.

The MSCI world equity index, which tracks shares in 49 countries, was down 0.5%, and MSCI's main Europe Index was down 0.8%.

Although China's GDP returned to growth in the second quarter, up 3.2%, retail sales data was worse than expected.

"We're going to see a mechanical V-Shaped recovery without a doubt but it's the economic effects, things like discretionary spending, that I think people's concerns are centred around," said Russell Silberston, investment strategist at Ninety One.

"The big concern that we have is the economic scarring – how much damage is being done," he said.

In currency markets, the dollar index firmed, up 0.1% at 96.104, having hit a one-month low on Wednesday.

The riskier Australian and New Zealand dollars slipped and euro-dollar, which hit a four-month high of $1.1452 on Wednesday, edged back down, at $1.1406.

Oil prices eased after OPEC and allies such as Russia agreed to taper record supply curbs from August, though the drop was cushioned by hopes for a swift pick-up in U.S. demand after a big drawdown from the country's crude stocks.

Brent crude fell 18 cents to $43.61 a barrel, and U.S. West Texas Intermediate crude was down 29 cents, at $40.91 a barrel at 0800 GMT.

Gold prices eased somewhat but were near a nine-year peak.

Euro zone bond yields held broadly steady, with borrowing costs in the periphery near their lowest levels since March. The benchmark German 10-year Bund yield was at -0.446%.

In Europe, the focus is on the European Central Bank's meeting, at which it is expected to announce no new policy measures, having already bought record amounts of debt as part of its emergency response to COVID-19.

"Though recent comments from ECB officials have shown signs of an emerging optimism, our economists don’t believe these signal a change in the policy stance, and expect the commitment to "substantial monetary policy stimulus" to be repeated," Deutsche Bank (DE:DBKGn) strategist Jim Reid wrote in a note to clients.

The International Monetary Fund's top official warned on Wednesday that a second major wave of infections could trigger more economic disruption.

Rising COVID-19 cases have seen some countries re-impose lockdown measures, but the effect of new infections on daily market moves is not clear-cut, as the more economies shut down, the more stimulus from central banks and governments is expected.

"If cases are rising and we see more lockdowns then that uncertainty will almost definitely hit markets," Ninety One's Silberston said.

"But, big picture, markets have rallied massively from the lows on the basis of stimulus so there's a counter-argument that says: Ok, if we do go into lockdown, we'll see even more stimulus," he said.

The ECB delivers its decision at 1145 GMT, and ECB President Christine Lagarde will hold a news conference at 1230 GMT.

© Reuters. A man wearing a protective face mask walks past the London Stock Exchange Group building in the City of London financial district, whilst British stocks tumble as investors fear that the coronavirus outbreak could stall the global economy, in London

Investors are also focused on a European Union summit on Friday and Saturday, at which the proposed EU-wide coronavirus recovery fund will be discussed.

Latest comments

China had a special virus it unleashed from Wuhan.. Many say from a LABORATORY. Now they caused TRILLIONS IN DAMAGE
Nobody is saying from a lab except Trump: the bean salesman.
Sell Eur
V-shaped recovery? Make it a very wide U-shape. We haven't seen the worse yet....
risk adverse - whom are you trying to kid - you need a magnifier to recognize todays (preliminary) red candle in the chart....
But but vaccine hopes...
Buy Gold and Stocks now that's the correct mix.
within hours we will see greenery in all indices.. this is a buy on dips market big time.. don't short any dops even by mistake..
but today was a MIRACULOUS DAY cause of a vaccine??? 🤦🏽‍♂️🤦🏽‍♂️😂😂🤣🤣😈😈😈😈 #fakenews #fakevirus
buy low sell high that is all...
Pure basics of Trading.. Well said 🔥💯
All lies.. this dip must be used to buy.. S&P is going to touch 4200 soon.. before US elections, the intelligent man Pres Trump is not going to allow any crash in the market.. and if he gets a second trump, this will be the biggest and mother of any bull runs ever in the history.. Covid is a silly distraction and nothing more..
Maybe everyone now knows that you can take China's numbers and divide by 2 to get the actual number.
If China's industrial output beat expectations in June, but retail sales unexpectedly fell again, this is suggesting they are producing more stuff than people will buy....
Yes I agree. Besides industrial output could well be in backlog which is processed, explaining the higher than expected
They made a lot of mask and ventilator.
vaccine hopes tonight
When the market goes down the excuse is never the truth that it’s incredibly overvalued given the lack of visibility in 2H29 AND 1H21. When the algos sense selling momentum, nothing except the built-in circuit breakers will temporarily stop S&P = 2800.
They let it run up.(again) so when will it plummet again? . phase 2 of Hoax in session.
.....as virus fears weigh... such BS.
“Virus fears”- if you have nothing to write about or need an excuse to justify the movements....use the “campaign of fear” words.....”virus”
One day the market completely ignores the virus or focuses on a tiny scientific vaccine advance, but when it’s a convenient excuse for a valuatuon-based selloff, the virus is the excuse. This market is hanging by a thread.
Tomorrow healine if markets increase. China GDP dominated virus fears
wall st has to be red tomorrow.
Deep red.
I am surprise how contradictory the news are...US rise on vaccine hope and Asian shares fall a virus fears weighCan someone tell me exactly what is happening...
Shows the quality of reporting. I have a hunch the article was generated by AI which could explain the seemingly contradictory overtones. Also, the expected poor earnings season is featuring nowhere which means that the algo is picking buzz words "virus", "vaccine", "US-China tensions", etc. and creating an article around it.
Yes, no one wants to acknowledge that the market is WAY overvalued given the earnings AND economic uncertainties that will persist in 2H20 and 1H21.
Bu i see Asian markets all red today....?
China summons US ambassador, says US blocks its development The Associated Press - Canadian Press - 3 minutes ago
Vaccine hopium hype, LOL, to drive the market up to retest the most recent highs. How convenient. Some analyst/hedge fund voice implanted those words and the market goes up. -- The same reason that we don't have an HIV vaccine now - is that the virus mutates too often to foresee the right strain mutation 6 mos into the future. For this SAME reason, there won't be a COVID vaccine! Mark my words. HIV came decades ago and we still have no vaccine for it despite tens of thousands of deaths worldwide. --
True, same for bird flu, swine flu and previous covid viruses. No vaccines! sure this time around the amount of effort is huge. winner stad to make billions in profit. I would think this early is just a hype to make people feel good. don't get me wrong I'm rooting for vaccine asap.
JP Morgan Predicts WORST Yet To Come and Banks Prepare for MEGA BANKRUPTCIES
Still buying on fake vaccine news?
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