European stock markets retreat as Fed boss Powell disappoints

European stock markets retreat as Fed boss Powell disappoints

London Stock Exchange
FILE PHOTO: Pedestrians leave and enter the London Stock Exchange. (REUTERS/Neil Hall)

LONDON: European stock markets mostly retreated on Tuesday (Jul 9), with investors looking for any monetary policy hints from the head of the US Federal Reserve left wanting.

"Despite - or perhaps because of - Jerome Powell failing to comment on monetary policy during his appearance in Boston, the Dow Jones continued to fret over the likelihood of a rate cut this month," Speadex financial analyst Connor Campbell said in a note to clients.

Clues on the outlook for US interest rates have been keenly awaited after the country's recent strong jobs report threw into doubt expectations for a deep cut in American borrowing costs later this month to help boost the economy.

Powell, under fire from President Donald Trump, is set to deliver his semi-annual monetary policy report to lawmakers on Wednesday and Thursday.

"Ultimately the question for markets is quite how far the Fed is willing to go to maintain the US expansion, with any easing phase largely seen as a short-term shot in the arm rather than the beginning of a drawn-out easing cycle," said Joshua Mahony, senior market analyst at online trading platform IG.

Although the Dow and S&P 500 were lower in late morning trading, the Nasdaq managed to advance.

Asian indices mostly closed down.

Europe's main indices closed lower, with the biggest declines in share prices in Europe seen in Frankfurt following a profit-warning from German chemicals giant BASF.

'ECONOMIC PICTURE REMAINS GLOOMY'

Shares in BASF slumped over six percent after the company slashed its earnings forecast for the full year, blaming the impact of trade conflicts on the industry, before clawing back some of the decline to close 3.3 per cent lower.

Shares in Deutsche Bank, Germany's embattled biggest lender, continued to decline, as analysts said the jury was still out on the massive restructuring announced at the weekend.

Deutsche Bank shares closed the day down 4.2 per cent, among the worst performers on Frankfurt's DAX index of blue-chip companies, which was 0.9 per cent lower overall.

Topping London's FTSE 100 index meanwhile was UK online supermarket Ocado, whose shares jumped 5.6 per cent after the company posted strong revenues.

Shares in Air France fell 3.0 per cent after the government in Paris announced it would impose new taxes on plane tickets of up to €18 per flight.

Elsewhere on Tuesday, Richard Branson's Virgin Galactic said it will become the first publicly-traded space tourism project thanks to a New York-listed company's investment worth about $800 million.

The capital injection from Social Capital Hedosophia Holdings Corp. will enable British billionaire Branson to fund Virgin Galactic until its spaceships are able to commercially operate and become profitable.

On commodity markets, oil prices rose.

In currency trading, the pound slid further against the dollar ahead of a TV debate between the candidates to lead Britain's Conservative party and who will become the next prime minister.

"For traders, we are seeing a double whammy of no-deal Brexit fears, coupled with a BoE which suddenly sounds open to further easing in the event of a disorderly Brexit," said IG's Joshua Mahony.

"Unfortunately, with UK data sharply deteriorating off the back of a slump in business confidence, there are precious few reasons for that trend to change given the slender chance of a (Brexit) deal in the three months any new leader would have to get a deal across the line," he added.

Key figures around 1530 GMT:

London - FTSE 100: DOWN 0.2 per cent at 7,536.47 points (close)

Paris - CAC 40: DOWN 0.3 per cent at 5,572.10 (close)

Frankfurt - DAX 30: DOWN 0.9 per cent at 12,436.55 (close)

EURO STOXX 50: DOWN 0.4 per cent at 3,509.66

Tokyo - Nikkei 225: UP 0.1 per cent at 21,565.15 (close)

Hong Kong - Hang Seng: DOWN 0.8 per cent at 28,116.28 (close)

Shanghai - Composite: DOWN 0.2 per cent at 2,928.23 (close)

Euro/dollar: DOWN at US$1.1208 from US$1.1211 at 2040 GMT

Dollar/yen: UP at 108.81 yen from 108.75 yen

Pound/dollar: DOWN at US$1.2457 from US$1.2512

Brent North Sea crude: UP 13 cents at US$64.24 per barrel

West Texas Intermediate: UP 15 cents at US$57.81 per barrel

Source: AFP/de

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