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Europe close: Politics in focus, Technology issues hammered

By Alexander Bueso

Date: Monday 12 Nov 2018

Europe close: Politics in focus, Technology issues hammered

(Sharecast News) - Stocks have begun the week lower, with early gains evaporating alongside another move lower in the single currency and talk of continued outflows from risk assets in Europe.
Commenting on the day's action, Chris Beauchamp at IG told clients: "After a shaky start indices have turned firmly lower, putting a further dent into the gains made since the October bottom. The president might flatter himself that the stock market's wobble is due to the Democrats, but with Italy and Brexit stalking European markets, and concerns about technology valuations making investors hesitant, it looks like the bounce of the past two weeks has run its course.

"Hopes were high last week that the sell-off had come to an end, after the Dow hit a one-month high, but such optimism has been dashed. The snowball to the downside could start to move rapidly once again, as investors look to protect themselves before further losses, ironically accelerating the sell-off they fear."

Dampening sentiment, shares in Italian lender Carige were suspended following reports of a possible funding shortfall.

In the background meanwhile, analysts at Bank of America-Merrill Lynch were pointing out to clients how risk assets in Europe saw further outflows last week, as investors sought "safety" by heading into money market funds.

"The lack of yield in Europe vs. the US, and the diverging economic macro cycles between the two regions is something to blame for this exodus from European risk assets," they explained.

Euroland politics was also very much in the news, with Italian Deputy Prime Minister, Matteo Salvini, saying at the weekend that his country could hamper European Union activities in protest at being "jerked around" over Rome's handling of migrants, ANSA reported.

By the end of trading, the benchmark Stoxx 600 was down by 1.01% or 3.71 points at 362.03, alongside a 1.77% or 203.72 point drop on the German Dax to 11,325.44, while France's Cac-40 was off by 0.93% or 47.66 points at 5,059.09.

Technology was the weakest segment of the market, with the corresponding Stoxx 600 gauge down by 3.52% at 413.25, with Oil & Gas acting as an offset throughout much of the session after Saudi signalled at the weekend that it might be prepared to curb crude shipments starting from December.

However, as of the London close the latter's gain had been whittled down to an advance of just 0.11% to 332.14.

In parallel, euro/dollar gave up 0.83% to trade at 1.12432 as the US dollar spot index notched up a fresh 52-week high, while the yield on the benchmark 10-year Italian government note was trading up by four basis points to 3.44%.

According to European Commission president, Jean Claude Juncker, the bloc might only be safe from additional car tariffs imposed by Washington until the end of the year.

The Stoxx 600's Auto&Parts sector gauge surrendered 1.15% to 477.42 alongside a 1.30% drop to 145.36 in the sector index for lenders' shares.

Commenting on the slide in the single currency, Bart Hordijk, Market Analyst at Monex Europe, blamed 'four apocalyptic horseman' for the weakness in the single currency: "Brexit, Italy, slower growth and a cautious European Central Bank are the four apocalyptic horsemen currently chasing the euro to its doom - well, at least to a 17-month low against the dollar."

Italian industrial production dipped by 0.2% month-on-month in September, ISTAT said, weighed down by a 1.9% fall in the output of durable consumer goods and a 1.6% drop in that of capital goods, but nevertheless beat forecasts for a decline of 1.0%.

In parallel, France's central bank reported that its industrial confidence index slipped from a reading of 104.0 for September to 103.0 in October, adding that its monthly activity indicator was pointing towards a quarterly rate of economic growth of 0.4% over the last three months of 2018.

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