By Carla Mozee, MarketWatch
U.K. growth forecast raised slightly for 2018
European stocks fell into the red Tuesday, hurt as the euro and
the U.K. pound rose against the U.S. dollar on easing concerns that
the Federal Reserve will raise borrowing rates by more than
anticipated this year.
Stocks throughout the region had been largely kept aloft by
well-received financial updates from German utility E.ON and others
before investors juggled expected economic updates from the U.S.
and the U.K. Market attention was also on the unexpected timing for
the firing of U.S. Secretary of State Rex Tillerson
(http://www.marketwatch.com/story/tillerson-out-as-secretary-of-state-as-trump-taps-cia-chief-pompeo-2018-03-13).
How markets are moving
The Stoxx Europe 600 index fell 0.3% to 377.92, led down by the
telecom and consumer-goods sectors. But the utility and oil and gas
groups were modestly higher. On Monday, the pan-European index rose
0.3%
(http://www.marketwatch.com/story/european-stocks-aim-for-6th-straight-win-buoyed-by-us-jobs-data-and-utility-shares-2018-03-12)
as a complex deal between German utilities lifted that sector.
Germany's DAX 30 index lost 0.6% to 12,343.47, as only two
components moved higher. The U.K.'s FTSE 100 indexdropped down
(http://www.marketwatch.com/story/ftse-100-steady-ahead-of-uk-spring-statement-us-inflation-data-2018-03-13)
by 0.6% to 7,173.52.
France's CAC 40 index reversed course and fell 0.1% to 5,273.41.
But Spain's IBEX 35 held to a rise of 0.1% to 9,742.70.
The euro bought $1.2373, up from $1.2337 late Monday in New
York.
What is driving the market
Investors dragged European stocks lower as the both the euro and
the pound climbed against the greenback . The euro hit an intraday
high of $1.2386, the strongest since March 7, according to FactSet
data, while the pound reached a two-week high at $1.3971.
Euro strength can pressure revenue for European exporters as it
makes their goods and services more expensive to purchase for
overseas buyers and hurt their earnings. Sterling strength can eat
into earnings made by multinational companies that weigh heavily on
the FTSE 100. Among euro companies that can be sensitive
The dollar fell after the U.S. consumer prices index in February
rose 0.2%, matching expectations. That reading tamped down concerns
that the Fed will raise interest rates four times in 2018 instead
of three as previously expected. That implies a rise in the costs
of borrowing for companies worldwide. Higher interest rates can
attract investors to a country's currency.
The U.S. annual inflation rate is running at 1.7%. Some
questions about the rate of inflation and the pace of rate hikes
were raised by Friday's U.S. jobs report, which showed a subdued
rate of wage growth. The eurozone's final reading of consumer price
inflation for February is scheduled for release on Friday.
Read:Consumer inflation less threatening in February, CPI shows
(http://www.marketwatch.com/story/consumer-inflation-less-threatening-in-february-cpi-shows-2018-03-13)
As that report was released, Britain's Chancellor of the
Exchequer Philip Hammond in his Spring Statement said the Office
for Budget Responsibility raised its 2018 forecast for U.K.
economic growth
(http://www.marketwatch.com/story/uk-economy-to-grow-more-than-seen-in-2018-obr-2018-03-13)
to 1.5%. That's modestly higher than the previous estimate of 1.4%.
Hammond also said U.K. inflation will move toward the 2% target
over the next 12 months. U.K. inflation currently stands at 3%.
What strategists are saying
"Sterling was buoyed by a trifecta of events unfolding
consecutively at lunchtime today," including the U.S. inflation
data and the Spring Statement that showed improvement in the U.K.
economy. said Hamish Muress, currency analyst at OFX.
"Finally, and most crucially, [U.S. President] Donald Trump
announced that he had fired his U.S. Secretary of State Rex
Tillerson, replacing him with CIA director Mike Pompeo. It was this
final event that caught the market unaware and has caused the U.S.
dollar to suffer loses across the board," said Muress.
"Many analysts have suggested in the last week that political
risks have largely subsided in the U.S. as Trump has backed away
from sweeping steel and aluminium tariffs, but today's event goes
to show how quickly things can change in Washington," he added.
Stocks in focus
E.ON SE shares (EONGY) jumped 4.8% as the German utility said it
will raise its dividend, and said it swung to a yearly net profit
(http://www.marketwatch.com/story/eon-swings-to-profit-partly-on-lower-tax-rate-2018-03-13)of
EUR3.93 billion ($4.85 billion), aided by a reduced tax rate. E.ON
also expects to cut around 5,000 jobs during the integration of
Innogy SE (IGY.XE) , which it will take over through an asset-swap
deal with RWE AG.
RWE shares (RWE.XE) turned lower, losing 1.7% after the utility
said it swung to a 2017 net profit
(http://www.marketwatch.com/story/rwe-swings-to-net-profit-in-2017-2018-03-13).
Actividades de Construccion y Servicios SA (ACS.MC) gave up
gains of more than 2% and fell 0.3% in Madrid. The shares had risen
following reports late Monday the company and Italy's Atlantia SpA
(ATL.MI) are close to reaching a preliminary deal to take joint
control of Spanish infrastructure firm Abertis Infraestructuras SA
(ABE.MC) . Reuters
(https://www.reuters.com/article/us-abertis-m-a-atlantia/atlantia-acs-close-to-deal-on-joint-control-of-abertis-italian-sources-idUSKCN1GO24T)
quoted two Italian sources as saying an agreement is near.
Antofagasta PLC (ANTO.LN) shares rose 2.7% after the copper
producer posted a more than fourfold rise in 2017 net profit
(http://www.marketwatch.com/story/antofagasta-2017-profit-soars-on-copper-price-rise-2018-03-13).
TP ICAP PLC (TCAP.LN) fell 8.6%, trading at the bottom of the
Stoxx 600, as the interdealer broker posted a decline in 2017
pretax profit
(http://www.marketwatch.com/story/tp-icap-posts-lower-pretax-profit-shares-fall-2018-03-13),
to GBP72 million ($99.9 million) from GBP167 million a year
ago.
Iliad SA shares (ILD.FR) sank 9.2%, with the French
telecommunications company's 2017 earnings report showing net
profit was essentially flat
(http://www.marketwatch.com/story/iliad-yearly-profit-flat-despite-rise-in-revenue-2018-03-13)
despite a 5.6% rise in revenue that was largely driven by its
mobile business.
(END) Dow Jones Newswires
March 13, 2018 11:56 ET (15:56 GMT)
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