Stock Market News (European Open) – Monetary policy, geopolitics on equity traders’ focus; Stoxx 600 up in morning trading


Andreas Georgiou, XM Investment Research Desk

North Korea yesterday accused the US of declaring war on the country, giving it the right for countermeasures, including shooting down US war jets even if they’re flying outside its air space. This is not the first time that such a statement (i.e. the US declaring war on North Korea) has been made by Pyongyang, though given what preceded this time round it may carry more weight than in the past.

Rhetoric between the US and North Korea getting heated did affect investors’ positioning with perceived safe havens such as gold gaining yesterday, though the risk-off mood attributed to tensions between the two countries seems to gradually dissipate. The precious metal is declining today after gaining nearly 1.2% during yesterday’s trading.

In Asia, the Nikkei 225 lost 0.3% after adding 0.5% the preceding day. The Topix, a wider gauge of Japanese equities, finished the day flat. Hong Kong’s Hang Seng and the Shanghai Composite rose by 0.05% and 0.1% respectively after being dragged lower yesterday by declining property developer stocks. Australia’s S&P/ASX 200 fell by 0.2% and the South Korean Kospi contracted by 0.3%.

In morning European trading, the FTSE 100 was 0.2% lower, while the DAX was 0.2% up and the CAC 40 higher by 0.1%. Meanwhile, the pan-European Stoxx 600 added 0.1% and the blue-chip Stoxx 50 gained 0.05%.

Energy, up by 0.6%, was the Stoxx 600 best performing sector. WTI and Brent crude are both currently down on the day but they posted hefty gains in recent weeks to rise to multi-month highs. The latest support to oil prices came after threats by Turkey to forbid Kurdish crude shipments through its territory.

German property company Deutsche Wohnen was the Stoxx 600’s lead gainer, being up by 4.3%. The company will issue a new bond offering it cheaper financing relative to the past. The pan-European’s benchmark’s worst performer was UK motoring group and mid-cap stock AA plc. Its stock price was last down by 8.5%, reaching an all-time low as well. The company slightly beat H1 EBITDA but expects additional capex in FY 2019, something which has been interpreted as a negative by investors. Broker Jefferies gave the stock an “underperform” rating, saying “We remain concerned that the business cannot generate sufficient cash flow to satisfy both debt and equity holders.”

Major indices on Wall Street declined yesterday, pushed lower by a selloff in tech stocks. Specifically, the tech-heavy Nasdaq Composite lost 0.9%, having its worst day since early September. Dow futures were last up on the margin and S&P 500 equivalents marginally down. Nasdaq 100 contracts were trading 0.1% higher. Apple, a component stock in all three indices fell 0.9% yesterday. Worries about demand for iPhone 8 are weighing on the company’s stock price. Corporate giants Facebook and Microsoft also retreated significantly, falling by 4.5% and 1.55% respectively.

Besides geopolitics, market participants are closely watching developments on the monetary policy front. Investors will closely follow Fed Chair Janet Yellen’s speech on inflation, uncertainty, and monetary policy in Cleveland, Ohio at 1645 GMT.