LONDON, Dec 27 — Europe’s major stock markets kicked lower today as investors shrugged off bumper Wall Street gains, cashed in recent profits and eyed mounting uncertainties on the horizon of the global economy.
Wall Street had roared back to life yesterday, shaking off four straight routs following strong retail sales data and White House reassurances that Federal Reserve Chair Jay Powell won’t be fired.
European equities also hit a wall, slipping into negative territory in low-volume trade with many investors away for a long festive break.
In late morning deals, Frankfurt stocks tanked 1.7 per cent as the market opened for the first time this week — and played catch-up with Monday’s heavy losses elsewhere in Europe.
London sank 0.8 per cent and Paris shed almost 0.1 per cent compared with Monday’s closing levels.
‘Rally hits wall’
“The rally which we experienced over on Wall Street yesterday has hit the wall,” ThinkMarkets analyst Naeem Aslam told AFP.
“Investors are busy profit-taking. Basically, we are struggling for the momentum to continue.”
New York stocks had hurtled higher in post-Christmas trade yesterday, following strong data and White House reassurances that Powell would remain in his post.
Sentiment also improved after a Bloomberg News report said a US government delegation would travel to Beijing in early January to hold trade talks, the first face-to-face discussion since US President Donald Trump and Chinese President Xi Jinping agreed on a 90-day trade war truce.
The Dow Jones Industrial Average finished up nearly 1,100 points, or about five per cent, at 22,878.45 points, and the broad-based S&P 500 also flew 5 per cent higher.
Investors in Europe however took the new-found optimism in their stride.
Russ Mould, investment director at stockbroker AJ Bell, warned that yesterday’s “Boxing Day bonanza” could yet prove to be a “bear trap”.
“The FTSE 100 is treating a 5.0-per cent surge in America’s S&P 500 benchmark with a good degree of caution and it is easy to see why, even if that was the eighteenth biggest single-day gain in the US index since 1970,” said Mould.
“Encouragingly, three of the seventeen other 5.0-per cent-plus advances came immediately in the aftermath of the 1987 crash, when buying did prove a good plan, and two more in March 2009 when the S&P finally hit bottom as the great financial crisis began to abate.
“But history also shows eight of the 5-per cent-plus gains came during the bear market of 2007-2009 and three more during the market downturn of 2000-2003 — to suggest there is still a risk that this year’s Boxing Day bonanza could be no more than a wicked bear trap set to lure investors into more trouble,” Mould cautioned.
Many global investors have been unnerved by a variety of factors, including the partial US government shutdown and Trump’s ongoing criticism of Fed Chair Powell.
Other negative factors include risks of a no-deal Brexit when Britain leaves the European Union in March 2019— and the ongoing trade war between China and the United States.
Back in Asia, Chinese markets slid after the release of weak economic data, showing that profits in the industrial sector declined 1.8 per cent in November. Hong Kong lost 0.7 per cent and Shanghai shed 0.6 per cent.
In commodity deals, oil prices on profit-taking after chalking up their biggest gains in almost two years yesterday.
Source: The Malay Mail Online