Stock Market News (European Open) – European equities edge higher; Trump comments largely shrugged off

Stock Market News (European Open) – European equities edge higher; Trump comments largely shrugged off

Andreas Georgiou, XM Investment Research Desk

In Asian markets, the Nikkei 225 added little after yesterday’s massive gain by nearly 2.0%, rising by 0.05% in today’s trading. Japan’s broader equity gauge, the Topix, was flat at yesterday’s level which constituted the highest the benchmark has reached since August 2015. Hong Kong’s Hang Seng gained 0.3% and the Shanghai Composite advanced by 0.3%. Australia’s S&P/ASX 200 lost a bit less than 0.1%.

US President Donald Trump delivered a tough speech yesterday at the UN, threatening to “totally destroy” North Korea, though the markets’ reaction indicated that investors do not perceive the comments as leading to an escalation of pre-existing tensions between the two countries. Also, the fact North Korea didn’t opt to proceed with a retaliatory action today, could have helped traders’ risk sentiment.

Now attention remains firmly on the outcome of the Federal Reserve meeting which will be completed today. Prevailing expectations are that the Fed will announce that it will proceed with its balance sheet reduction plans starting next month, as well as signal that an interest rate hike later in the year is not to be ruled out. However, how (the tone) these are communicated has the potential to lead to sharp market movements.

Turning to European equities, the FTSE was up by less than 0.1%, while the DAX and CAC 40 were both up by around 0.15% in early European trading hours. The pan-European Stoxx 600 was 0.1% higher, reversing earlier losses, while the blue-chip Stoxx 50 was up on the margin.

The Stoxx 600’s as well as the FTSE’s lead gainer was Kingfisher, last being up by 6.0%. Europe’s largest home improvement retailer reported better than expected first-half profits, though it should be mentioned that the company was cautious on the macroeconomic environment in the UK and France during the second half of the year. On the downside, Metro Bank was one of the worst performing stocks within the Stoxx 600’s, being down by 3.9%. Broker Macquarie assigned the bank an “underperform” rating. In other news, Zara parent Inditex reported a rise in first-half profits, though gross margins fell, in part attributed to the stronger euro. Its stock price last traded 1.7% down.

In M&A activity, steelmaker Thyssenkrupp struck a preliminary deal with India’s Tata Steel to consolidate their steel operations in Europe. Thyssenkrupp traded 3.6% up during morning European trading hours, making itself one of the best performing stocks within the Stoxx 600.

Stoxx 600 Banks was last 0.3% down on the day. Deutsche Bank (down 1.6%), Barclays (down 0.9%), Commerzbank (down 0.8%) and the aforementioned Metro Bank (down 3.9%) were among the sub-index’s notable decliners. Deutsche Bank was also the German DAX’s worst performing stock. Financials, which benefit from higher interest rates, are in focus ahead of monetary policy decisions such as today’s decision by the Fed.

Dow Jones and S&P 500 futures were last up on the margin and Nasdaq 100 equivalents marginally lower. The former two once again posted a record close in yesterday’s session.

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