By Carla Mozee, MarketWatch
Bank stocks fall after ECB call
European stocks on Friday finished deeply in the red a day after
scoring their best session in a month, with bank shares under
pressure amid a ramp up in U.S.-China trade clash. However, most of
the major European bourses retained weekly gains.
How markets are performing
The broader Stoxx Europe 600 Index fell 1% to 389.13, topped by
the consumer goods and industrial sectors. For the week, however,
the pan-European index posted a 1% weekly advance, representing its
best such rise since the period ended May 11, according to FactSet
data.
On Thursday, the index jumped 1.2%
(http://www.marketwatch.com/story/european-stocks-drop-as-investors-brace-for-ecb-update-2018-06-14)--its
best gain since April 5, driven largely by a tumble in the
euro.
Germany's DAX 30 index retreated by 0.7% to 13,010.55, but
posted a 1.9% weekly advance, and Spain's IBEX 35 dropped 1.1% to
9,851, but held on to a 1.1% weekly climb. The U.K.'s FTSE 100 lost
1.7% to 7,633.91, producing its worst daily tumble since Feb. 6,
and ending with a weekly skid of 0.6%.
Italy's FTSE MIB index shed 1.3% to 22,190.45, but still
finished the period with a weekly rise of 3.9%, while France's CAC
40 index gave up 0.5% to 5,501.88, but booked a weekly return of
1%.
Read: 5 key takeaways from the ECB's decision to wind down its
bond buying
(http://www.marketwatch.com/story/5-key-takeaways-from-the-ecbs-decision-to-wind-down-its-massive-bond-buying-program-2018-06-14)
The euro traded at $1.1590, up from $1.1569 late Thursday in New
York.
What's driving markets?
European bourses had a listless start before most moved lower
alongside a slide in U.S. stock futures . Those moves followed
reports of a second wave of tariffs on Chinese goods
(http://www.marketwatch.com/story/us-list-of-100-billion-more-in-china-tariffs-almost-finished-reuters-2018-06-15)
by the U.S.
Indeed, President Donald Trump announced levies
(http://www.marketwatch.com/story/trump-oks-around-50-billion-in-tariffs-on-chinese-goods-2018-06-14)
on about $50 billion in Chinese goods, and Beijing responded with
retaliatory tariffs on U.S. products.
In Europe, bank stocks fared the worst Friday. The Stoxx Europe
600 Bank Index finished down 1%. Lenders were under pressure after
the ECB on Thursday said the eurozone's interest rates--which are
at all-time lows--will remain at their present levels "at least
through the summer of 2019," and that the central bank will closely
monitor inflation developments.
Bank profits are helped by higher interest rates, as that
increases the spread banks earn between longer-term assets, such as
loans, and shorter-term liabilities.
On Friday, Eurostat confirmed its initial estimate of a 1.9%
inflation rate for the eurozone in May year-over-year, meeting
expectations. The ECB targets inflation at just below 2%.
Meanwhile, the euro was modestly higher after it was slammed
down by more than 1.5% in the prior session, hurt by the ECB's
decision to hold off on raising interest rates. After the ECB's
statement Thursday, there was speculation that the central bank
could be shifting toward a rate hike in early to mid-2019, as it
signaled it will wind down its EUR2.5 trillion ($2.95 trillion)
program of bond buying, or quantitative easing.
The move comes after a busy week of central-bank news. On
Wednesday, the Federal Reserve lifted its benchmark federal-funds
rate by a quarter-percentage point and signaled it will raise rates
four times in 2018
(http://www.marketwatch.com/story/fed-hikes-interest-rates-now-sees-4-moves-this-year-2018-06-13).
On Friday, the Bank of Japan left monetary policy steady, but
investors were focused on its comments on consumer price inflation.
The BOJ now sees CPI at a range of 0.5 to 1%, compared with around
1% in its April statement.
What strategists are saying
"With all of this week's central bank event risk out of the way,
we now turn to trade wars," said Elsa Lignos, global head of FX
strategy at RBC Capital Markets.
"This shouldn't come as a surprise, given how well-flagged these
tariffs have been--but many may have assumed Trump's stance would
soften given the positive reaction to the Kim summit--and
confirmation that the tariffs are going ahead could still cause
some risk aversion," Lignos said in a note.
"With the ECB sounding cautious on inflation, the market took
this as a dovish steer on future rate moves....Essentially, the ECB
is now formally beginning on its tightening path and this should
help to support the euro in the medium to longer term," said
Richard Perry, market analyst at Hantec Markets.
"For now, the euro is under pressure, but once the dust settles
it should begin to find support once more," Perry said in a
note
Stock movers
Among bank stocks, Spanish lender Bankia SA (BKIA.MC) fell 2.9%,
and Italian lender Banco BPM SpA (BAMI.MI) gave up 1.9%. French
bank Société Générale SA (GLE.FR) lost 1.5% and Germany's Deutsche
Bank AG (DBK.XE) lost 1.7%.
Indivior PLC shares (INDV.LN) sank 27% after the U.S. Food and
Drug Administration late Thursday said it approved the first
generic version of a Suboxone under-the-tongue film
(http://www.marketwatch.com/story/fda-approves-generic-version-of-suboxone-film-2018-06-14)
used treat opioid addiction. Indivior is the maker of Suboxone.
Rolls-Royce Holdings PLC (RR.LN) rallied 7.6% after the British
aircraft-engine maker said its planned job cuts should help it
exceed a target of GBP1 billion in cash flow
(http://www.marketwatch.com/story/rolls-royce-job-cuts-to-help-hit-1b-in-cash-flow-2018-06-15)
by 2020. Rolls-Royce on Thursday said it would cut 4,600 jobs over
the next 24 months
(http://www.marketwatch.com/story/rolls-royce-to-cut-4600-jobs-amid-engine-problems-2018-06-14).
BTG PLC shares (BTG.LN) dropped 4.1% after the health-care
company said an FDA panel voted against approving its Elevair
Endobronchial Coil System for the treatment of people with severe
emphysema.
(END) Dow Jones Newswires
June 15, 2018 14:33 ET (18:33 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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