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European stocks extend downturn after US jobs data
LONDON, Oct 6, 2018 (BSS/AFP) – European equities fell further Friday
after US jobs data, while missing forecasts, seeemed to strengthen the case
for rapidly rising US interest rates, analysts said.
Wall Street was also lower despite a confirmation by the jobs market that
the US economy was firing on all cylinders, they added.
The US non-farm payroll for September came in at 134,000 new jobs, far
fewer than analysts had expected, but as August figures were revised up, they
were “far from a terrible employment number”, said Craig Erlam, an analyst at
Oanda.
“This is actually another very good report that other countries will be
extremely envious of,” he said.
– ‘Gradual normalization’ –
The data, added Harm Bandholz at UniCredit, “allow the Federal Reserve to
continue its policy of gradual normalization”.
But as expectations of higher Fed rates increased, so did US Treasury bond
yields, in turn weighing on stock markets because of expectations of higher
borrowing costs.
With Treasuries the key gauge for Federal Reserve policymakers when
deciding interest rate hikes, markets are growing more concerned that the
cost of borrowing will rise more than anticipated, and hit the economy.
“Equities are under pressure as investors fear the Fed will need to
tighten policy faster than expected to keep the US economy from overheating,”
noted City Index analyst Fiona Cincotta.
– Denmark’s Danske in dumps –
“The overriding concern is that higher US interest rates will dampen
growth, and this is what is causing the selloff in equities,” she explained.
This week also saw Fed chief Jerome Powell deliver an assessment of
interest rates that added fuel to the fire for many who forecast a quick pace
of hikes.
MORE/HR/0929
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In Europe meanwhile, shares in Danske Bank stumbled in Copenhagen, a day
after the lender revealed it was being investigated by the US Department of
Justice over possible money laundering related to more than 200 billion euros
($235 billion) that had moved through the Danish lender’s Estonian branch.
Denmark’s largest bank is at the centre of a reputational maelstrom and
several probes after it said “a large part” of the transactions between 2007
and 2015 were “suspicious”.
In a fresh twist on Friday, the Financial Times reported that Danske
executed up to 8.5 billion euros of controversial “mirror trades” for Russian
customers in a single year, according to an internal memo obtained by the
newspaper.
– Bad week ‘understatement’ –
Since the start of the year, shares in Danske Bank have lost almost 40
percent of their value.
“The weekend cannot come quick enough for Danske. To say it’s been a bad
week for the bank would be an understatement,” City’s Cincotta said.
“It would take a brave trader to buy into this right now.”
In London, Unilever shares dipped after the Anglo-Dutch consumer giant
axed post-Brexit plans to switch its London headquarters to Rotterdam owing
to a shareholder revolt.
Shares in the Italian football club Juventus lost 9.92 percent to 1.19
euros after a former model alleged that the club’s striker Cristiano Ronaldo
raped her in 2009.
BSS/AFP/HR/0930