Wednesday, 20 September 2017 07:13 GMT


European stocks falter on emerging market strains

(MENAFN - AFP) European stock indices extended recent losses on Monday, hit by emerging market strains and expectations of further stimulus withdrawal by the Federal Reserve, analysts said. London's benchmark FTSE 100 index was additionally hit by sharp falls for the share prices of British energy company BG Group and mobile phone giant Vodafone.Limited support came from a sharp rise to German business confidence, traders said. The FTSE shed 1.03 percent to 6,595.21 points in late morning deals.Frankfurt's DAX 30 dropped 0.18 percent to 9,374.96 points and in Paris the CAC 40 lost 0.13 percent to 4,156.24 compared with Friday's closing values.The euro rose to $1.3687 from $1.3675 in New York late on Friday."Emerging markets turmoil is seriously impacting the mood in Europe," said Varengold Bank trader Anita Paluch."Different countries, different issues, but it boils down to increased risk aversion and flight to safety. This mixture of economic and politic problems from different parts of the globe is spilling over and making traders brace for another day of increased volatility."Much attention has been on Turkey, where the central bank announced that it would hold an extraordinary meeting on Tuesday as the lira continues to slide against the dollar and the euro. The bank, which intervened heavily in the foreign exchange market to support the lira last week, is under strong political pressure not to raise interest rates.The ruble was also caught by the trend. The euro shot up by about one percent to 47.63 rubles, substantially stronger than the 42.25 ruble record it had set in the worst months of Russia's 2008-2009 financial crisis.The dollar was up 0.9 percent to 34.79 rubles. The level was also its highest against the Russian currency since the end of 2008.Moscow's VTB Capital investment house summed up the trading floor sentiment by calling the ruble's performance "one of capitulation", but the economy minister said that the fall would boost exports.Stock markets slump globallyPlaying catch-up with Friday's heavy losses across European indices and on Wall Street, Asian stock markets closed sharply lower on Monday, with investors gripped by renewed fears over emerging economies days ahead of a crucial Federal Reserve policy meeting.Tokyo tumbled 2.51 percent, Seoul fell 1.56 percent, Hong Kong dived 2.11 percent and Shanghai gave up 1.03 percent.In New York on Friday, the Dow sank 1.96 percent, the biggest percentage point fall since June last year, while the S&P 500 plummeted 2.09 percent and the Nasdaq lost 2.15 percent.US investors ran for cover on Friday as an 11-percent slump in the Argentinian peso against the dollar refuelled concerns about emerging market currencies.Those fears were exacerbated by data last week indicating manufacturing activity in China -- a key driver of global growth -- had contracted in January.The growing pessimism sent investors to seek out safer, lower-return assets, particularly the Japanese yen, which is considered a haven in times of economic uncertainty.Gold, also seen as a haven investment, rose to $1,269.20 an ounce on the London Bullion Market from $1,267 in Friday trade.The yield on French 10-year bonds eased to 2.366 percent from 2.376 percent on Friday after Moody's held its rating for France at "Aa1" but with negative outlook.Traders will now be looking to this week's Fed meeting to see if it announces any further cuts to its stimulus programme.The US central bank last month said it would reduce its bond-buying by $10 billion-a-month (7.3 billion euros) from January to $75 billion, citing a pick-up in the economy.However, the move has raised fears of a capital flow from developing countries as investors repatriate their cash to the West."A combination of factors has caused markets to squirm, including the contraction in Chinese growth last week and the expectation of further cuts in the (Fed's) debt-purchasing scheme later this week," said Alastair McCaig, market analyst at traders IG. "Once again EU finance ministers are meeting in Brussels. However, the biggest issues worrying them in terms of the region's recovery will arguably be outside the EU borders."BG, Vodafone shares diveOn the corporate front, shares in BG Group dived 14.75 percent to 1,070 pence in Monday deals after the company warned that annual output would miss expectations and would cut the value of assets by $2.4 billion in Egypt and the United States.Vodafone meanwhile tumbled 5.14 percent to 220.6 pence after US telecoms giant AT&T said it was not planning to launch an offer for mobile phone group amid fresh rumours of a mega bid. British media reports over the weekend said AT&T was looking into offering about £60 billion ($99 billion, 72 billion euros) for Vodafone following similar market speculation last year.
European stocks falter on emerging market strains

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