ZCZC
BCN-17
EUROPE-STOCKS-MARKETS
Dollar cure for European stocks summertime blues
LONDON, July 19, 2018 (BSS/AFP) – Gains by the dollar in the wake of the
Federal Reserve chief expressing confidence in the US economy despite global
trade war fears helped push European stocks higher on Wednesday.
Meanwhile, a batch of strong earnings reports saw Wall Street keep rising
for the most part.
“The positive sentiment began on Wall Street following Federal Reserve
Chair Jay Powell’s stating his confidence in the US economy to lawmakers” on
Tuesday, said London Capital Group analyst Jasper Lawler.
In the first of his two days of testimony before lawmakers Powell indicated
that the US central bank plans to continue gradually raising interest rates
due given the strength of the economy, citing a strong job market and
inflation figures.
While higher interest rates drag on corporate earnings and are usually not
welcomed by stock investors, Powell’s confidence in the economy helped
reassure markets worried about a deepening trade war.
“We remain in an environment where investors believe higher earnings as a
result of stronger growth outweighs the risks from higher interest rates.
Powell also acknowledged on Tuesday uncertainty about the “outcome of
current discussions over trade policy”, with US President Donald Trump
hitting out at China and other economic partners as he adopts an aggressive
“America First” policy.
Fears about an all-out China-US trade war continue to rattle investors,
with both sides lodging counter-complaints at the World Trade Organisation
after recently imposing tariffs and threatening more on billions of dollars’
worth of goods.
Washington’s traditional allies Japan and the EU have also not been spared
hefty US tariffs.
However gains by the dollar helped push up stocks in Japan and Europe as a
weaker currency can help boost exports.
Meanwhile the pound slid to a 2018 low at $1.3010 on receding prospects of
a UK interest-rate hike next month after British inflation undershot
expectations.
The pound has taken a knock this week also from uncertainty surrounding the
future of British Prime Minister Theresa May as she struggles to unite a
divided Conservative Party over the government’s Brexit strategy.
Meanwhile, shares in Google dipped 0.3 percent after the EU slapped a
record 4.34-billion-euro fine on the firm for abusing the dominance of its
Android operating system, although it pulled other tech shares into the red
along with it.
“It is a huge future earnings hit for Alphabet,” said London Capital
Group’s Lawler.
“The worry for the tech sector is that the EU doesn’t stop here” as it has
several other anti-trust investigations against tech firms underway, he
added.
The tech-heavy Nasdaq Composite index was down nearly 0.1 percent
approaching midday in New York.
Elsewhere on Wednesday, oil prices extended losses as data showed that US
stocks rose more than expected by analysts and production reached a new
record.
Brent crude struck a fresh three-month low at $71.23 per barrel.
BSS/AFP/HR/1025