European stock markets mostly lower as US, China prepare to sign trade pact

European stock markets mostly lower as US, China prepare to sign trade pact

LSE London Stock Exchange
Logo of the London Stock Exchange.

LONDON: European stock markets were mostly lower on Wednesday (Jan 15) as investors took a step back after weeks of gains and awaited the signing of a long-expected China-US trade deal.

European indices followed Asia lower, though London's benchmark FTSE 100 posted a rise owing to a weaker pound which boosts share prices of the index's multinationals whose earnings in are foreign currencies.

The pound dropped versus the euro as annual British inflation slumped to a three-year low of 1.3 per cent in December, raising the chances of a Bank of England interest-rate cut on the eve of the country's exit from the European Union.

In New York, the Dow index was above its all-time closing high, in intraday trades.

Elsewhere, official data showed that German economic growth fell sharply in 2019.

Business activity in the European powerhouse expanded by just 0.6 per cent last year, far less than the already modest increase of 1.5 per cent in 2018.

Oil prices drifted lower meanwhile after a monthly OPEC report estimated that stronger growth in demand for crude this year would be more than offset by increased production by non-OPEC members.

While the mood on trading floors was broadly upbeat as tensions between the economic superpowers have eased, investors have already taken this into account according to analysts.

"We've been waiting for the (US-China) signing ceremony for so long but there is a worry that, despite details of the deal being largely concealed, what we are hearing is a little underwhelming and may be already priced in, maybe even too much," commented Craig Erlam, senior market analyst at OANDA Europe.

Analysts also warned there will not likely be much more progress on the next phase of talks ahead of the US presidential election in November.

"It's possible that instead we see Trump threaten China more, dangling the prospect of abandoning the deal and taking an even tougher stance going into the election," remarked Neil Wilson at Markets.com.

"What is not clear is the extent to which this will hurt growth rates and may contribute to upwards pressure on inflation," he added.

Under terms of the mini pact, which eases a two-year standoff that has jolted the global economy, the White House is to cut in half tariffs imposed Sep 1 on US$120 billion of Chinese goods and cancel a second round that had been set for Dec 15.

In return, Beijing has pledged vast sums to buy US products including pork and soybeans.

Officials said full details would be made public after the signing ceremony in Washington.

Key figures at 1645 GM:

London - FTSE 100: UP 0.3 per cent at 7,642.80 points (close)

Frankfurt - DAX 30: DOWN 0.2 per cent at 13,432.30 (close)

Paris - CAC 40: DOWN 0.1 per cent at 6,032.61 (close)

EURO STOXX 50: DOWN 0.2 per cent at 3,768.96

Tokyo - Nikkei 225: DOWN 0.5 per cent at 23,916.58 (close)

Hong Kong - Hang Seng: DOWN 0.4 per cent at 28,773.59 (close)

Shanghai - Composite: DOWN 0.5 per cent at 3,090.04 (close)

Pound/dollar: UP at US$1.3027 from US$1.3019 at 2200 GMT

Euro/pound: UP at 85.63 pence from 85.48 pence

Euro/dollar: UP at US$1.1156 from US$1.1128

Dollar/yen: DOWN at 109.98 yen from 109.99

Brent Crude: DOWN 0.3 per cent at US$64.28 per barrel

West Texas Intermediate: DOWN 0.4 per cent at US$58.01 per barrel

Source: AFP/de

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