EUROPE MARKETS: European Stocks Lose Ground As Euro Drives Further Into 3-year Highs
15 Gennaio 2018 - 12:01PM
Dow Jones News
By Carla Mozee, MarketWatch
Santander may be hurt by Carillion's collapse, says report
European stocks pulled lower Monday, weighed as the euro
continued to march up further into 3-year highs, putting the
regional benchmark at risk to fall for the third session in
four.
Investors were also watching for developments from the U.K.,
where construction and outsourcing heavyweight Carillion PLC has
collapsed.
How markets are moving
The Stoxx Europe 600 index fell 0.2% to 397.86, led by tech and
health care shares. But the industrial and basic materials groups
topped advancing sectors. On Friday, the index rose 0.3%
(http://www.marketwatch.com/story/european-stocks-edge-up-with-fiat-gaining-but-euro-jumps-on-german-progress-2018-01-12)
and that move allowed it to end last week higher by 0.3%.
In Frankfurt on Monday, the DAX 30 index lost 0.2% at 13,215.35,
and France's CAC 40 gave up 0.2% at 5,504.79.
Spain's IBEX 35 was fractionally higher at 10,466.90. The U.K.'s
FTSE 100 index was off 0.1% at 7,773.41
(http://www.marketwatch.com/story/ftse-100-steps-back-from-record-with-carillion-collapse-in-focus-2018-01-15)
after Friday's record closing high.
The euro bought $1.2263, rising from 1.2200 late Friday in New
York.
What's driving markets
Most European benchmark were stuck in the red while the euro
headed toward $1.2300, a level that hasn't been seen since December
2014, according to FactSet data. A stronger euro can make products
produced by European exporters more expensive for their overseas
customers to purchase.
The euro began its leap last week after minutes from the
European Central Bank's meeting in December suggested the bank may
take a more hawkish stance on its monetary policy.
While rate-hike speculation has ramped up, Bundesbank President
Jens Weidmann, who tends to be on the hawkish side of ECB policy,
said "imminent risk of a change is small for the moment," a Reuters
report
(https://uk.reuters.com/article/uk-ecb-policy-weidmann/ecbs-weidmann-plays-down-risk-of-imminent-rate-hike-idUKKBN1F122F?il=0)
quoted him as saying in Germany late Friday. The ECB will next meet
on Jan. 25.
Also kicking off Monday trade was news that British construction
company Carillion (CLLN.LN) will enter liquidation after crisis
talks failed over the weekend
(http://www.marketwatch.com/story/carillion-to-go-into-liquidation-after-talks-fail-2018-01-15).
The construction company, which also runs public services at
prisons, hospitals and schools, couldn't work out a deal with the
government and its creditors. Carillion employs 20,000 in the U.K.
and uses thousands of subcontractors. Its shares have been
halted.
What strategists are saying
"The ECB's [minutes] was indeed upbeat but was also clear that
inflation continued to undershoot, and that is was committed to the
sequence of finishing asset purchases and then, after some time,
lifting rates," said currency strategists at Brown Brothers
Harriman in a Monday note.
"If anything, the strong euro will dampen inflation pressures
and squeeze earnings. Anglo-American companies are more likely to
pass along currency developments to customers, while Continental
and Japanese businesses appear to put more emphasis on market share
than short-term profitability are less likely," they said. "The
euro's 2.5% appreciation on a trade-weighted basis is tantamount to
a 40 basis points tightening of monetary policy."
Stock movers
Metso Oyj (METSO.HE) fell 8.8% as the Finnish engineering group
warned that fourth-quarter 2017 profitability of its minerals
segment will be weaker than expected, "due to a
higher-than-estimated share of equipment sales compared to services
sales and a weak margin of the services business." Metso said
overall fourth-quarter sales are set to rise 5% from a year ago, to
EUR710 million.
Shares in Carillion's rivals were mixed. G4S PLC (GFS.LN) rose
1.5% while Balfour Beatty PLC (BBY.LN) turned lower, losing 0.8%.
Meanwhile, Banco Santander PLC (SAN) was off 0.1%. The Spanish
lender is set to be hurt by Carillion's collapse as Santander's
U.K. branch is one of the company's principal creditor
(Santander%e2%80%99s%20U.K.%20branch%20is%20one%20of%20the%20company%e2%80%99s%20principal%20creditor.),
business daily Expansion reported, citing unnamed sources in the
sector.
GKN (GKN.LN) rose 4.1%, at the top of the Stoxx 600, after
reports that U.S.-based private equity firm Carlyle is considering
a bid for the U.K. engineering group. Meanwhile, Melrose Industries
PLC (MRO.LN) , whose takeover bid was recently rejected by GKN,
said Monday it will start holding a series of meetings with
shareholders to discuss the proposal. Melrose shares flipped up to
trade 1.1% higher.
(END) Dow Jones Newswires
January 15, 2018 05:46 ET (10:46 GMT)
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