By Carla Mozee, MarketWatch
U.K. growth forecast raised slightly for 2018
European stocks, led lower by German shares, snapped a
six-session win streak Tuesday, as the euro and the British pound
leapt against the dollar after a round of tame inflation data.
Stocks had been largely kept aloft by well-received financial
updates from German utility E.ON and others before investors
juggled expected economic updates from the U.S. and the U.K. Market
attention was also briefly captured by the firing of U.S. Secretary
of State Rex Tillerson
(http://www.marketwatch.com/story/tillerson-out-as-secretary-of-state-as-trump-taps-cia-chief-pompeo-2018-03-13).
How markets moved
The Stoxx Europe 600 index declined 1% to close at 375.47, the
largest loss since March 2, according to FactSet data. No sector
moved higher. On Monday, the pan-European index rose 0.3%
(http://www.marketwatch.com/story/european-stocks-aim-for-6th-straight-win-buoyed-by-us-jobs-data-and-utility-shares-2018-03-12)
as a complex deal between German utilities lifted that sector.
Tuesday's biggest index loser was Germany's DAX 30 , which fell
1.6% to 12,221.03, as only two of its components--E.On SE and
airline Deutsche Lufthansa AG (LHA.XE)--moved higher.
The U.K.'s FTSE 100 indexdropped
(http://www.marketwatch.com/story/ftse-100-steady-ahead-of-uk-spring-statement-us-inflation-data-2018-03-13)
1.1% to 7,138.78. France's CAC 40 index fell 0.6% to 5,242.79.
Spain's IBEX 35 lost grip of its gain to end 0.4% lower at
9,691.70.
The euro bought $1.2404, up from $1.2337 late Monday in New
York.
What drove markets
Investors dragged European stocks lower as the both the euro and
the pound climbed against the greenback . The euro rose above $1.24
for the first time since March 8, according to FactSet data, while
the pound reached a three-week high at $1.3994 before European
equity markets closed.
Euro strength can pressure revenue for European exporters as it
makes their goods and services more expensive to purchase for
overseas buyers and hurt their earnings. Sterling strength can eat
into earnings made by multinational companies that weigh heavily on
the FTSE 100. Among euro companies that can be sensitive
The dollar fell after the U.S. consumer-price index in February
rose 0.2%
(http://www.marketwatch.com/story/consumer-inflation-less-threatening-in-february-cpi-shows-2018-03-13),
matching expectations. That reading tamped down concerns that the
Fed will raise interest rates four times in 2018 instead of three
as previously expected. That implies a rise in the costs of
borrowing for companies world-wide. Higher interest rates can
attract investors to a country's currency.
The U.S. annual inflation rate is running at 1.7%. Some
questions about the rate of inflation and the pace of rate
increases were raised by Friday's U.S. jobs report, which showed a
subdued rate of wage growth. The eurozone's final reading of
consumer price inflation for February is scheduled for release on
Friday.
Read:Consumer inflation less threatening in February, CPI shows
(http://www.marketwatch.com/story/consumer-inflation-less-threatening-in-february-cpi-shows-2018-03-13)
As that report was released, Britain's Chancellor of the
Exchequer Philip Hammond in his Spring Statement said the Office
for Budget Responsibility raised its 2018 forecast for U.K.
economic growth
(http://www.marketwatch.com/story/uk-economy-to-grow-more-than-seen-in-2018-obr-2018-03-13)
to 1.5%. That's modestly higher than the previous estimate of 1.4%.
Hammond also said U.K. inflation will move toward the 2% target
over the next 12 months. U.K. inflation currently stands at 3%.
What strategists are saying
"Sterling was buoyed by a trifecta of events unfolding
consecutively at lunchtime today," including the U.S. inflation
data and the Spring statement that showed improvement in the U.K.
economy. said Hamish Muress, currency analyst at OFX.
"Finally, and most crucially, [U.S. President] Donald Trump
announced that he had fired his U.S. Secretary of State Rex
Tillerson, replacing him with CIA director Mike Pompeo. It was this
final event that caught the market unaware and has caused the U.S.
dollar to suffer loses across the board," said Muress.
"Many analysts have suggested in the last week that political
risks have largely subsided in the U.S. as Trump has backed away
from sweeping steel and aluminum tariffs, but today's event goes to
show how quickly things can change in Washington," he added.
Stocks in focus
TP ICAP PLC (TCAP.LN) sank 10.5%, hitting the bottom of the
Stoxx 600, as the interdealer broker posted a decline in 2017
pretax profit
(http://www.marketwatch.com/story/tp-icap-posts-lower-pretax-profit-shares-fall-2018-03-13),
to GBP72 million ($99.9 million) from GBP167 million a year
ago.
Iliad SA shares (ILD.FR) sank 10%, with the French
telecommunications company's 2017 earnings report showing net
profit was essentially flat
(http://www.marketwatch.com/story/iliad-yearly-profit-flat-despite-rise-in-revenue-2018-03-13)
despite a 5.6% rise in revenue that was largely driven by its
mobile business.
E.ON SE shares (EONGY) jumped 3.9% as the German utility said it
would raise its dividend, and said it swung to a yearly net profit
(http://www.marketwatch.com/story/eon-swings-to-profit-partly-on-lower-tax-rate-2018-03-13)of
EUR3.93 billion ($4.85 billion), aided by a reduced tax rate. E.ON
also expects to cut around 5,000 jobs during the integration of
Innogy SE (IGY.XE), which it will take over through an asset-swap
deal with RWE AG.
RWE shares (RWE.XE) lost 2.9%. The shares had been higher after
the utility said it swung to a 2017 net profit
(http://www.marketwatch.com/story/rwe-swings-to-net-profit-in-2017-2018-03-13).
Antofagasta PLC (ANTO.LN) shares rose 3% after the copper
producer posted a more than fourfold rise in 2017 net profit
(http://www.marketwatch.com/story/antofagasta-2017-profit-soars-on-copper-price-rise-2018-03-13).
Actividades de Construccion y Servicios SA (ACS.MC) gave up
gains of more than 2% to finish down by 0.7% in Madrid. The shares
had risen following reports late Monday the company and Italy's
Atlantia SpA (ATL.MI) are close to reaching a preliminary deal to
take joint control of Spanish infrastructure firm Abertis
Infraestructuras SA (ABE.MC). Reuters
(https://www.reuters.com/article/us-abertis-m-a-atlantia/atlantia-acs-close-to-deal-on-joint-control-of-abertis-italian-sources-idUSKCN1GO24T)
quoted two Italian sources as saying an agreement is near.
(END) Dow Jones Newswires
March 13, 2018 13:26 ET (17:26 GMT)
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