EUROPE MARKETS: European Stocks Slide The Most In 5 Months As Britain Heads Toward Snap Election
April 18 2017 - 12:22PM
Dow Jones News
By Carla Mozee and Sara Sjolin, MarketWatch
Pound leaps on perceived clarity offered by election plan;
First-round French vote comes Sunday
European stocks moved sharply lower on Tuesday, with U.K. stocks
leading the charge south after U.K. Prime Minister Theresa May
unexpectedly called an early general election.
A slump in commodity shares and nerves ahead of the first round
of voting in France's presidential election on Sunday also added
selling pressure on European equity benchmarks
The Stoxx Europe 600 index slid 1.1% to close at 376.35, marking
its biggest one-day percentage drop since Nov. 2, according to
FactSet data.
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 posted its biggest one-day
percentage drop since June last year, down 2.5% to end at 7,147.50,
after May said she wants Britain to hold a general election on June
8.
The election is aimed at strengthening the Conservative
government's position as it prepares to negotiate Britain's exit
from the European Union. The pound jumped above $1.27, trading
around its highest level since early December.
Read:Why the snap U.K. election is a 'game-changer' for the
pound
(http://www.marketwatch.com/story/heres-why-the-pound-surged-to-10-week-high-after-may-called-snap-uk-election-2017-04-18)
A strong sterling tends to weigh on the 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 1.6% to 4,990.25, its
worst session since September.
"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 $1.0705, compared with $1.0644 late Monday
in New York.
In Frankfurt, the DAX 30 fell 0.9% to 12,000.44.
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 3.1% on Tuesday.
Among miners, steel producer ArcelorMittal (MT) sank 6.2%,
Tenaris SA (TEN.MI) fell 3.4%, Antofagasta PLC (ANTO.LN) fell 3.4%
and Glencore PLC (GLEN.LN) moved down 5.6%.
(END) Dow Jones Newswires
April 18, 2017 12:07 ET (16:07 GMT)
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