EUROPE MARKETS: European Stocks Fall As Miners Suffer, Britain Moves Toward Snap Election
April 18 2017 - 9:15AM
Dow Jones News
By Carla Mozee, MarketWatch
Pound leaps on perceived clarity offered by election plan;
First-round French vote comes Sunday
European stocks were in selloff mode Tuesday, with commodity
shares struggling and investors nervous ahead of the first round of
voting in France's presidential election on Sunday.
U.K. blue-chip stocks contributed to the slide, dropping to
intraday lows after U.K. Prime Minister Theresa May surprisingly
called an early general election.
The Stoxx Europe 600 index declined 0.9% to 377.19. No sector
moved higher, and oil and gas and basic materials groups lost the
most, FactSet data showed. Trading was closed Monday for the Easter
holiday. Last week, which was shortened by the Good Friday holiday,
the regional benchmark fell 0.2%, its first pullback in three
weeks.
British surprise: The U.K.'s FTSE 100 slid 1.7% to 7,200.55
after May said she wants Britain to hold a general election on June
8. The move is aimed at strengthening the Conservative government's
position as it prepares to negotiate Britain's exit from the
European Union. The pound was pushing toward $1.27, and a stronger
pound weighs on London-listed multinationals.
"Opinion polls suggest that May can win an election now given
the weakness of the opposition and given that the country still
hasn't felt much of a downside effect as a consequence of Brexit,"
wrote Jane Foley, senior FX strategist at Rabobank, in a note.
"If polls continue to suggest that May will be handed a strong
mandate this is likely to lessen scope for uncertainty and
volatility for the pound," she wrote.
See:Risk of 'a reversal in the entire Brexit process' --
analysts react to U.K. election surprise
(http://www.marketwatch.com/story/uk-adds-another-layer-of-complexity-analysts-react-to-surprise-snap-election-call-2017-04-18)
France: May's call for a general election came less than a week
before the first round of voting in France's presidential election
on Sunday.
In Paris, the CAC 40 was knocked down 1.3% to 5,006.75, on track
for its worst session since September 2016.
"The difference of votes between the 4 [leading presidential]
candidates is less than 3%, which poses more uncertainty to the
election," said FXPro technical analyst Devata Tseng in a note.
"While the latest odds still give independent Emmanuel Macron a
healthy chance of winning in May, his odds have fallen as those of
[conservative François] Fillon and far-left candidate [Jean-Luc]
Mélenchon have surged," wrote Kathleen Brooks, research director at
City Index.
"If we get a Macron/Fillon second-round runoff, this is likely
to be considered 'market friendly,' triggering a rally in the euro,
the CAC, but also in the German DAX and Eurostoxx index, which have
had decent correlations with the French bond yield this year," she
said.
Read: Raucous French election could be won by dark horse
François Fillon
(http://www.marketwatch.com/story/raucous-french-election-could-be-won-by-dark-horse-francois-fillon-2017-04-13)
Both Melenchon and the far-right Front National's Marine Le Pen
want a shake-up of the European Union and to put France's EU
membership to a vote. A so-called Frexit could spark turmoil as
France is seen as an integral part of the both the eurozone and the
EU.
The euro was buying $1.0685, compared with $1.0644 late Monday
in New York.
In Frankfurt, the DAX 30 fell 0.6% to 12,035.87.
Miners: Tuesday's session saw European mining shares shoved
lower as iron ore prices slumped to their lowest in five months on
concerns stemming from China after weaker housing data there. That
conflicted with weekend news that the world's second-largest
economy posted first-quarter gross domestic product of 6.9%
(http://www.marketwatch.com/story/china-gdp-grows-at-fastest-pace-since-2015-2017-04-16),
the fastest rate of growth since 2015.
"Though headline activity was robust, we see signs that growth
may be peaking," said UBS economist Donna Kwok in a research note.
"Despite property activity's rally in Q1, real property investment
was not as strong and has in fact been losing momentum since the
start of 2017."
Investors in mining shares watch developments in the Chinese
property market as the country is a major buyer of precious and
industrial metals. The Stoxx Europe 600 Basic Resources index
stumbled 2.8% on Tuesday.
"March's mixed import data also supported our view that while
Chinese domestic demand remains resilient, its momentum may be
approaching if not already peaked," said Kwok.
Among miners, steel producer ArcelorMittal (MT) sank 6.2%,
Tenaris SA (TEN.MI) fell 3.3%, Antofagasta PLC (ANTO.LN) fell 2.6%
and Glencore PLC (GLEN.LN) moved down 3.8%.
Losses for Antofagasta and Glencore also weighed on the FTSE
100, which was on track for its biggest loss since June 2016.
(END) Dow Jones Newswires
April 18, 2017 09:00 ET (13:00 GMT)
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