Europe close: More dovish ECB helps offset political uncertainty
By Alexander Bueso
Date: Friday 16 Nov 2018
(Sharecast News) - Stocks on the Continent finished slightly lower amid jitters that a possible no-confidence vote against the British Prime Minister might crystallise over the weekend with sentiment further dampened by poor quarterly results from US tech giant Nvidia overnight.
Commenting on the situation in Europe, David Madden at CMC Markets UK said: "Stock markets are in the red as investors are still worried about the political sentiment in the UK and Italy. Massive political uncertainty still hangs over Theresa May. Political commentators are questioning Mrs May's ability to sell the withdrawal agreement to her own party, and a failure to do so could lead to a no deal scenario - which has spooked investors.
"The political fight between Italy and the EU is taking a backseat to Brexit right now, but make no mistake, another round of the eurozone debt crisis could be in the offing."
Against that backdrop, by the end of trading the benchmark Stoxx 600 was lower by just 0.20% or 0.72 points to 357.71, alongside a dip of 0.17% or 8.42 points to 5,025.20 for the Cac-40, while the FTSE Mibtel was off by 0.14% or 27.05 points to 18,878.31.
In parallel, euro/dollar was up 0.66% at 1.14088.
Dublin's ISEQ meanwhile managed a feeble bounce following after getting slammed the day before on the back of concerns about the hit that the country's economy might take from a so-called 'hard' Brexit.
From a sector standpoint, Technology was among the worst performing areas of the market, with the Stoxx 600 sector gauge down by 0.74% at 411.85 and just off its 52-week lows.
Weighing on the tech space, on Thursday evening, US chip-maker Nvidia forecast a drop in its fourth quarter sales, after the recent slide in cryptocurrencies hit demand for its graphics cards.
Markets were also keeping an eye on Rome, where government officials were responding to speculation that the European Commission might fine Italy for breaking the Stability and Growth Pact.
According to Ansa, on Friday morning, deputy Prime Minister Matteo Salvini said that "they are crazy if the really do open an infringement procedure. 60 million Italians would rise up."
Be that as it may, arriving for an ECONFIN meeting in Brussels, Austria's finance chief, Hartwig Loeger, said: "We have not encountered any movement from Italy, so we expect a clear reaction from the Commission."
Helping to offset those soundbites, in remarks prepared for a speech at the European Banking Congress, in Frankfurt, ECB chief Mario Draghi sounded a confident note on the outlook for the Eurozone economy.
His words may have found a slight echo later in the session from one of his peers across the Pond, US Fed vice-chairman, Richard Clarida, who reportedly said interest rates in the States were now near 'neutral'.
Draghi argued for "patience", saying: "But in the light of the lags between wages and prices after a period of low inflation, patience and persistence in our monetary policy is still needed."
And should circumstance change for the worse, then the monetary authority's reaction function was clear, he said.
The economic calendar was otherwise rather light at the end of the week, with the main release of the session being euro area data showing a slight acceleration in the rate of consumer price gains from a pace of 2.1% year-on-year to 2.2%, as expected.
Nevertheless, according to ISTAT, Italian factory orders plunged at a seasonally-adjusted pace of 2.9% month-on-month on September, dragged lower by a 6.7% drop in those from overseas.
On the corporate front, shares in RBS traded lower despite having been promoted by the Financial Stability Board out of the list of lenders that might present the largest risk to the global financial system, as investors continued to price-in the risk of hard Brexit.
Stock in Swedish lender Nordea on the other hand, which also exited the FSB's list, gained.
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