Europe close: Stocks turn lower on investor caution, heightened political risk
By Alexander Bueso
Date: Friday 24 Feb 2017
(ShareCast News) - European stocks retreated on Friday, weighed down by a broad pull-back in risk apettite globally ahead of a key speech from US president Donald Trump in the following week.
By the close, the benchmark Stoxx Europe 600 index was down 0.76% or 2.84 points at 370.01, Germany's DAX fell 1.20% to 11,804.03 and France's CAC 40 was 0.94% weaker at 4,845.24.
Investors were a tad anxious after US Treasury Secretary reportedly said that a tax cut bill might have to wait until the August Congressional recess, pouring cold water on hopes of an earlier deal.
Thus, the spotlight was now very much on what Trump might say on the subject when he appeared before Congress on 28 February.
Also weighing on sentiment were weak earnings reports from Royal Bank of Scotland and German chemical giant BASF, as well as market jitters about the prospect of a Marine Le Pen victory in France.
The latter, together with buying from the European Central Bank and market-chatter regarding the potential impact of higher US trade tariffs, pushed the yield on German two-year government debt as low as -0.96% at one point during the session.
In parallel, Brent crude were down 0.73% to $56.17 alongside circa 3% falls for many industrial metals on the LME.
Banks were thus to be found among the worst performing sectors, with the corresponding Stoxx 600 sector gauge 1.33% lower to 169.76, although it was Basic Resource stocks that were faring worst, retreating 1.97% to 431.68.
Also in typical risk-off fashion, the euro was up 0.05% against the dollar to 1.0588 and rose 0.46% versus the pound to 0.84470.
Mike van Dulken, head of research at Accendo Markets, said: "European equities are on the back foot into the weekend, continued profit-taking dragging indices from recent highs. This stems from more tempered optimism towards President Donald Trump tax changes; pudding wanted for proof. A weaker dollar following less hawkish US Federal Reserve minutes hinders Europe via reciprocal sterling and euro strength, despite continental election risk.
Spreadex's Connor Campbell said that "it appears that the continued uncertainty surrounding the French election - and more specifically the chance of a Marine Le Pen victory and what that would mean for the EU - is driving the region's indices lower".
Investors were eyeing the upcoming presidential election in France as far-right candidate Le Pen has gained ground in recent polls, but it appears that French consumers are unfazed by the prospect of electoral shock in the upcoming election.
Insee's consumer confidence index was unchanged at 100 for the second straight month in February and is at its highest since 2007.
In corporate news, RBS fell 2.59% after reporting that its losses widened in the year to 31 December as the bank was hit by legacy issues. It posted a loss of £6.96bn for 2016, bigger than the £1.98bn the year before.
BASF fell 2.65% after the German chemicals firm said it is "cautiously optimistic for 2017" and posted better-than-expected fourth-quarter profit.
Standard Chartered lost 2.73% after it saw operating income fall in 2016 and continued to hold back on paying a dividend, but the Asia-focused bank reported better underlying profits and ended the year with income stable, lower costs and a much improved balance sheet.
Vivendi was down 3.94% on news that its chairman Vincent Bollore is being investigated for market manipulation by Italian prosecutors over the media company's stake in Italian broadcaster Mediaset. The company also reported a 23% drop in annual operating profit late on Thursday.
On the upside, British Airways and Iberia parent International Consolidated Airlines Group flew 4.46% higher after it announced a new share buyback and reported improved profits in the fourth quarter of last year and guidance for continued improvement in 2017.
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