EUROPE MARKETS: German Stock Market Slides By The Most In 3 Weeks As Euro Leaps
|07/18/2017 | 12:39pm|
By Carla Mozee, MarketWatch
German sentiment declines; Ericsson plunges; Greece delays tapping debt market
Stocks across Europe dropped on Tuesday, with the exporter-heavy DAX 30 index ending 1.3% lower at 12,430.39--its worst session since June 29.
More broadly, European benchmarks finished the session under pressure as the euro stepped up to a 14-month high against the U.S. dollar and as disappointing corporate earnings reports rolled in. The euro climbed to $1.1574 from $1.1479 late Monday, notching an intraday high of $1.1585. A stronger euro can hurt European exporters as it makes products more expensive for overseas customers.
The Stoxx Europe 600 slumped 1.1% to end at 382.58, the largest percentage decline since June 29, FactSet data showed. All sectors closed in the red, led by tech and basic material shares.
Investors began dumping equities when the session started, after Republican leaders in the U.S. Senate late Monday ditched their bill to repeal and simultaneously replace much of the Affordable Care Act, or "Obamacare."
That seemed to rattle investors' faith that President Donald Trump would be able to push through his pro-growth agenda, and the ICE Dollar Index was pushed back to levels not seen since September 2016.
"Without a successful repeal of the Obamacare legislation, [U.S. President Donald] Trump will have trouble financing his own plans making it very difficult to see how the dollar can remain bullish," said ADS Securities researcher Konstantinos Anthis in a note.
European equities were among those that had rallied after Trump's election in November on the prospect that plans for higher fiscal spending and lower corporate taxes would benefit European companies.
Earnings season: Ericsson shares (>> Telefonaktiebolaget LM Ericsson) tumbled nearly 15.6%. The sharpest slide since October 2016 was prompted by the Swedish telecom-equipment maker swinging to a bigger-than-expected net loss of 1.01 billion Swedish kronor ($122.3 million) in the second quarter. The company warned that earnings could weaken further as the market continues to struggle.
Zalando SE (>> Zalando) shares sank 8.3%, the deepest decline since June 2016. The German online retailer's sales growth slowed in the second quarter, according to a preliminary earnings report.
But shares in Novartis AG (>> Novartis) moved up 0.4% after the Swiss drug maker reported a slight gain in second quarter net income .
IG Group Holdings PLC (>> IG Group Holdings) rallied 16.4% after the spreadbetting company said full-year pretax profit has increased and that there has been no adverse impact from a U.K. regulator's recent proposals to reform the asset management market.
The Stoxx 600 Bank Index sank 1.6%, falling along with U.S. lenders after investment bank Goldman Sachs Group Inc. (>> Goldman Sachs Group) posted a 40% fall in its key trading business.
Individual indexes: France's CAC 40 index gave up 1.1% to close at 5,173.27, and Spain's IBEX 35 was pushed lower by 1.2% to 10,524.50.
Italy's FTSE MIB shed 0.6% at 21,358.20. The U.K.'s FTSE 100 closed 0.2% lower at 7,390.22.
Greece's Athex Composite fell 1.2% to 848.07. The Greek government postponed plans to issue new debt in the global bond market (http://www.ekathimerini.com/220152/article/ekathimerini/business/bond-issue-is-shelved-for-now) as it waits for a debt sustainability analysis from the International Monetary Fund, according to Greek daily Kathimerini. The mid-yield on Greece's current 10-year bond fell 4 basis points to 5.21% as prices rose, but the yield earlier climbed to 5.52%, according to Tradeweb data.
ECB and euro: "With the euro having broken above multi-months highs it will be key to see whether the single currency holds on to its gains ahead of the European Central Bank meeting on Thursday," Anthis said.
ECB President Mario Draghi is expected to be pleased with the progress of the euro area and attempt to prepare the markets for reduced stimulus from the ECB in the months to come, so the shared currency could trade with a positive bias going into the central bank's meeting, he added.
Data: German economic sentiment dropped in July , according to the ZEW think tank, but the outlook for Europe's largest economy continues to be favorable.
The pace of U.K. inflation eased unexpectedly in June, to 2.6% , the Office of National Statistics said.