Europe midday: Stocks drop as investors assess damage from global slowdown
By Alexander Bueso
Date: Tuesday 19 Feb 2019
(Sharecast News) - Stocks across the Continent are slipping lower as investors try to gauge the likely extent of the ongoing economic slowdown and wait for fresh headlines out of the trade talks between the US and China, which were set to resume later in the day, in Washington DC.
Markets were also digesting the most recent evidence of the toll which global uncertainty was taking, be it in HSBC's latest quarterly financials or in euro area balance of payments data for December, which Claus Vistesen at Pantheon Macroeconomics described as a "bloodbath".
Echoing those data points, analysts at Unicredit Research said their propietary lead indicator for global trade slipped to a reading of -0.8 for January, its weakest print in over seven years.
"Global markets have failed to gain any traction today, as news of further US-China trade talks failed to inspire stocks both in Asia and Europe. Marginal losses in China alluded to a growing disillusionment over the failure to make any significant breakthrough despite a ramp up in discussions," chimed-in IG's Josh Mahony.
"However, with the top US and Chinese negotiators lined up to meet once again on Thursday, there is still some hope that we will find a positive conclusion to avert the reintroduction of 25% tariffs in less than two-weeks."
By midday, the benchmark Stoxx 60 had dropped 0.47% to 368.02, alongside a fall of 0.83% to 20,157.61 on the FTSE Mibtel, although the German Dax was off by just 0.18% at 11,279.41.
Spain's Ibex 35 was also moving lower, retreating by 0.51% to 9,107.40.
Shares of banks were pacing losses, with the corresponding Stoxx 600 sector gauge down by 1.44% at 140.11.
To take note of, US and Chinese officials were set to resume their negotiations, on Tuesday, with America's Treasury Secretary and Trade Representative set to meet Vice Premier, Liu He, at the end of the week, on Thursday and Friday.
Also weighing on sentiment perhaps, in remarks to Boersen Zeitung overnight, European Central Bank chief economist, Peter Praet, said that: "If the euro-area economy were to slow more sharply, we could adapt our forward guidance on interest rates and this could be complemented by other measures."
However, whether or not the ECB's Governing Council would open the door to such a move as soon as at its next meeting, on 7 March, was not yet clear "at this stage", Praet added.
Meanwhile, in Spain, according to daily La Vanguardia, the country's government would make a last minute push to overturn various aspects of the prior administration's labour market reforms, which were widely credited for boosting Spain's economic growth and helping to lift it out of the financial crisis.
According to La Vanguardia, the government wanted to at least make the attempt given the potential electoral value of such a move ahead of the presidential and regional elections slated for 28 April and 26 May, respectively.
There was also some concern that the back-to-back elections might to lead to some 'contamination' from the former to the latter.
However, in remarks to the state controlled broadcaster TVE-1, the day before, a political analyst from Madrid's public Compluetense University, was dismissive of such concerns, insisting that the government's underlying motives were exactly the opposite.
Elsewhere on the economic front, ECB data revealed that the euro area's current account surplus registered another sharp drop in December to reach €16bn, after an upwardly revised reading of €23bn for the prior month (Preliminary: €20.3bn).
Meanwhile, figures for the Eurozone's financial account revealed a "bloodbath" according to Pantheon Macroeconomics's Claus Vistesen, as foreign investors yanked back on their direct investments and euro area residents cashed in on foreign stocks and cut the pace at which they purchased foreign fixed income instruments.
In parallel, Eurostat reported a 0.4% dip in euro area construction output for the month of December.
The ZEW Institute's economic sentiment index rose by 1.6 points to -13.4 (consensus: -14.0), but a sub-index linked to financial market experts' view of the present state-of-play dropped by 12.6 points to 15.0. February's reading was also well below the gauge's long-term average value of 22.4 and a rapid bounce-back was not on the cards, according to the ZEW President Achim Wambach.
On the corporate side of things, Reuters reported that US activist hedge fund manager, Elliot Singer, had taken a 6.1% stake in Dutch outfit Intertrust.
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