European stock markets mixed on US Fed chief's outlook

European stock markets mixed on US Fed chief's outlook

London Stock Exchange LSE
Logo of the London Stock Exchange

LONDON: European stock markets were mixed on Wednesday (Jul 10) after US Federal Reserve chief Jerome Powell kept the door open to an interest rate cut this month.

At the close of trade in Europe, both the blue-chip CAC 40 index in Paris and the FTSE in London were more or less unchanged, but the DAX 30 in Frankfurt fell on profit-taking.

Nevertheless, on the other side of the Atlantic, Wall Street was firmly in the black as Powell pointed to ongoing uncertainty about trade as a drag on US growth.

Powell did not explicitly say there would be more cuts in interest rates. But in his remarks to the House Financial Services Committee, he noted the Fed in June announced it "would act as appropriate to sustain the expansion".

That sent the S&P 500 surging past 3,000 points for the first time.

Edward Moya, analyst at Oanda, said Powell's comments underlined the clouds hanging over the economy.

"The economic outlook has not improved in recent weeks and that pretty much signals a rate cut" at the Fed's policy meeting on Jul 30-31, he said.

On the foreign exchange markets, the pound rebounded from more than two-year lows versus the dollar meanwhile, as official data showed Britain's economy returned to growth in May, with gross domestic product expanding by 0.3 per cent following a contraction of 0.4 per cent in April.

In Britain, "the pound caught some bid as the UK economy bounced back in May following the decline in April," noted Neil Wilson, analyst at Markets.com.

"But traders need to be careful as Brexit uncertainty remains the major drag on sterling."

Fed officials have helped spur a rally in world equities in recent weeks by taking an increasingly dovish or subdued tone regarding monetary policy, fuelling expectations they would cut borrowing costs sharply to support a stuttering economy.

Hopes for a deep reduction seemed to have been set back on Friday by data showing the US created far more jobs than expected in June.

But Powell told US lawmakers the case for lower rates "had strengthened" last month given the rising "crosscurrents" in the economy.

Elsewhere, oil prices jumped more than two percent after a closely watched industry report showed a massive drop in US stockpiles last week, while traders also cheered reports that Russian output fell in July to its lowest in nearly three years.

The developments provided a boost to the commodity, which took a hit earlier in the week as a stronger dollar added to ongoing worries about the trade war and soft global outlook.

Still, analysts said prices will remain volatile as investors weigh the trade row against geopolitical tensions in the Middle East.

Key figures around 1545 GMT:

London - FTSE 100: DOWN 0.08 per cent at 7,530.69 (close)

Paris - CAC 40: DOWN 0.08 per cent at 5,567.59 (close)

Frankfurt - DAX 30: DOWN 0.5 per cent at 12,373.41 (close)

EURO STOXX 50: DOWN 0.2 per cent at 3,501.52

Tokyo - Nikkei 225: DOWN 0.1 per cent at 21,533.48 (close)

Hong Kong - Hang Seng: UP 0.3 per cent at 28,204.69 (close)

Shanghai - Composite: DOWN 0.4 per cent at 2,915.30 (close)

Euro/dollar: UP at US$1.1257 from US$1.1207 at 2100 GMT

Pound/dollar: UP at US$1.2503 from US$1.2462

Dollar/yen: DOWN at 108.46 yen from 108.84 yen

Brent North Sea crude: UP US$2.25 at US$66.41 per barrel

West Texas Intermediate: UP US$1.92 at US$59.74 per barrel

Source: AFP/de

Bookmark