By Sara Sjolin, MarketWatch
Euro slides after PMIs raise concerns that recovery is
slowing
European stocks closed sharply lower on Wednesday, weighed by
the return of geopolitical concerns after comments by U.S.
President Donald Trump and a round of disappointing eurozone
data.
The pound dropped to a 2018 low after U.K. inflation
unexpectedly slipped in April.
What are markets doing?
The Stoxx Europe 600 index lost 1.1% to close at 392.58, pulling
back from Tuesday's close, which was the highest since Jan. 29
(http://www.marketwatch.com/story/european-stocks-inch-higher-as-italy-tensions-ease-for-now-2018-05-22).
Wednesday's loss marks the benchmark's worst day since March 22,
when it declined 1.6%.
Germany's DAX 30 index slumped 1.5% to 12,976.84, while France's
CAC 40 index dropped 1.3% to 5,565.85.
The U.K.'s FTSE 100 index fell 1.1% to 7,788.44
(http://www.marketwatch.com/story/uk-stocks-pull-back-from-record-high-with-inflation-data-on-deck-2018-05-23).
In Italy, the FTSE MIB index slid 1.3% to 22,911.71 as traders
waited for President Sergio Mattarella's decision on the prime
minister candidate put forward by a euroskeptic alliance to lead
their coalition government.
The euro fell to $1.1699 from $1.1780 late Tuesday in New
York.
The pound exchanged hands at a fresh 2018 intraday low of
$1.3305, down from $1.3432 late Tuesday.
What is driving the market?
Stocks in Europe declined as part of a global selloff spurred by
worries about Trump's latest comments on North Korea and the China
trade talks. The president said late Tuesday there is a "very
substantial chance" the historic meeting between him and North
Korea's leader Kim Jong Un won't happen in June as planned
(http://www.marketwatch.com/story/trump-says-summit-with-north-koreas-kim-may-happen-later-than-scheduled-2018-05-22)
unless Pyongyang meets certain conditions.
Separately, Trump said Tuesday that he was "not satisfied" with
the latest round of trade talks with China
(http://www.marketwatch.com/story/trump-today-president-suggests-world--class-poker-player-xi-to-blame-for-shift-in-north-koreas-attitude-about-summit-2018-05-22).
Equity markets world-wide have rallied in recent days on signs of
an easing in tensions between the world's two largest economies,
making a full-blown trade war appear less likely.
Closer to home, news emerged on Tuesday afternoon that the U.S.
may not extend the exemption for the European Union on steel and
aluminum tariffs. EU officials said the Trump administration had
proposed cutting the trade bloc's steel exports to the U.S. by 10%
(http://www.marketwatch.com/story/trump-weighs-10-cuts-on-eu-steel-aluminum-exports-to-us-2018-05-22).
What's going on in Italy?
Italian yields surged as uncertainty lingered over the country's
political future. The potential coalition of antiestablishment
parties 5 Star Movement and the League have reportedly run into
difficulties getting their prime minister candidate approved by
President Mattarella.
Doubts over the candidate -- a little known law professor named
Giuseppe Conte -- have cropped up amid questions over his resume
and academic achievements. According to Conte's resume, he has
"perfected" his studies at prestigious universities such as La
Sorbonne in France and New York University, but both schools say
they have no records of his attendance, according to media reports
(https://www.cnbc.com/2018/05/23/conte-italy-populists-face-setback-on-their-new-leader.html).
The yield on 10-year Italian bonds jumped 8 basis points to
2.396%.
What data are in focus?
The latest economic activity data from the eurozone came in
weaker than expected. The composite flash purchasing managers index
for the currency union fell to an 18-month low in May at 54.1.
Economists had expected a 55.1 reading, according to FactSet
consensus estimates. A reading above 50 indicates an expansion in
activity.
In France, data showed unemployment rose in the first quarter of
the year, offering another sign the eurozone recovery of 2017 is
losing momentum in 2018.
U.K. inflation unexpectedly dipped in April, according to the
Office for National Statistics. Consumer prices rose 2.4% last
month, down from 2.5% in March and missing forecasts of 2.5%
reading.
What are strategists saying?
"Whilst certainly not entirely gloomy, the euroboom has
descended pretty quickly and the outlook is not overly positive,"
said Neil Wilson, chief market analyst at Markets.com, in reference
to the latest PMI data.
"Add in the political risks emerging in Italy, and it all looks
quick tricky for the ECB as it tries to exit QE. As previously
argued, the ECB missed its window of opportunity late last year to
really push normalization and is now in more of a bind," he said in
a note, referring to the European Central Bank's steps toward
ending a stimulus effort known as quantitative easing.
Stock movers
Euronext NV (ENX.FR) slid 6.3% after UBS downgraded the
stock-exchange operator to sell from neutral.
Shares of Marks & Spencer Group PLC (MKS.LN) (MKS.LN) jumped
5.2% after the retailer posted profit ahead of expectations
(http://www.marketwatch.com/story/marks-spencer-2018-pretax-profit-plummets-62-2018-05-23).
Standard Chartered PLC (STAN.LN) rose 0.4% after a report in the
Financial Times that Barclays PLC (BCS) (BCS) is exploring merger
options
(http://www.marketwatch.com/story/barclays-explores-merge-options-ft-2018-05-23),
including a tie-up with Standard Chartered. Barclays shares closed
down 1.1%. Sources close to Barclays, however, dismissed the report
(https://www.reuters.com/article/us-barclays-m-a/barclays-has-no-plans-for-tie-up-with-rival-banks-sources-idUSKCN1IO0OK?utm_campaign=trueAnthem:+Trending+Content&utm_content=5b05162404d301382da1be81&utm_medium=trueAnthem&utm_source=twitter),
according to Reuters.
Babcock International Group PLC (BAB.LN) climbed 2.6% after the
defense-services provider said profit before tax increased by 8% in
fiscal 2018
(https://www.google.dk/search?q=babcock&rlz=1C1GGRV_enGB752GB752&oq=babcock&aqs=chrome..69i57j69i60l2j0l3.935j0j9&sourceid=chrome&ie=UTF-8).
(END) Dow Jones Newswires
May 23, 2018 12:08 ET (16:08 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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