US-China tensions weigh on European stocks

08-Aug-2020 Intellasia | Yahoo Finance UK | 6:50 AM Print This Post

European stock markets were mixed on Friday morning, as flaring tensions between the US and China offset solid economic data across the continent.

Friday morning saw better-than-expected economic data in Germany, France, and Spain, suggesting eurozone economies were recovering well after the COVID-19 lockdown. Exports jumped in Germany, while industrial production was better-than-expected in all three nations.

“A surge in exports and industrial production confirms the ‘V’-shaped rebound,” Carsten Brzeski, the chief eurozone economist and global head of macro at Dutch bank ING, wrote of Germany in a note on Friday morning.

However, he added: “The shape of the subsequent recovery is much more uncertain.”

Shortly after the open, the FTSE 100 (^FTSE) was down 0.1%, the CAC 40 (^FCHI) fell 0.3%, and the DAX (^GDAXI) was flat. Spain’s IBEX 35 (^IBEX) dropped 0.6%.

Sentiment wasn’t helped by flaring tensions between the US and China overnight. US president Donald Trump signed an executive order requiring all US companies to stop dealing with Chinese social media app TikTok within 45 days.

Asian stock markets fell and Jim Reid, a senior strategist at Deutsche Bank, pointed to Donald Trump’s TikTok ban as one of the reasons for the sell-off.

“Against this backdrop, risk sentiment has turned negative overnight in Asia,” Reid and his team wrote in a morning note to clients.

Japan’s Nikkei (^N225) fell 0.3%, the Hong Kong Hang Seng (^HSI) dropped 1.8%, the Shanghai Composite (000001.SS) declined by 0.9%, and the Shenzen Component (399001.SZ) fell 1.5%. Australia’s ASX 200 (^AXJO) dropped by 0.6%.

Wall Street looked set for a lower open later today. S&P 500 futures (ES=F) and Dow Jones futures (YM=F) were down 0.3%, while Nasdaq futures (NQ=F) were 0.4 percent lower.

“In the US, attention will be on July’s nonfarm payrolls and the unemployment rate as well as final June wholesale inventories and consumer credit,” wrote Deutsche Bank’s Reid.

Connor Beakey, an economist at Irish bank AIB, wrote: “A 1.6 million increase is pencilled in for payrolls but Wednesday’s employment data suggest there are downside risks to this forecast. The re-imposition of Covid restrictions in parts of the US to curtail the virus spread likely weighed on the labour market recovery.”


Category: China

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