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European stocks drop amid trade and Fed concerns

January 11
07:04 2019
  • Traders believe there is some positive momentum in the relationship between the U.S. and China over trade. However, investors are also keeping a close watch on the Federal Reserve’s rate hiking path.
  • The U.K. Parliament agreed Wednesday that the government must come up with a plan-B within three days if the Withdrawal Agreement is not approved on Tuesday.

European shares traded lower on Thursday as investors focused on trade war developments and monetary policy in the U.S.

The pan-European Stoxx 600 was 0.3 percent lower with almost every sector in the red. Autos were among the worst-performing sectors, alongside basic resources. Both sectors are sensitive to trade news.

The Chinese foreign ministry said Thursday that there has been progress in talks with the United States, including over forced technology transfers and intellectual property rights. There is an ongoing truce in the trade war between both countries until early March, as both sides attempt to seek a new trade agreement.

Traders believe there is some positive momentum in the relationship between the U.S. and China over trade. However, investors are also keeping a close watch on the Federal Reserve ‘s rate hiking path. The central bank published minutes of its last meeting on Wednesday and these showed that policymakers believe there is a “relatively limited amount” of rate hikes coming.

Yellow Vests, Christmas shopping

Looking across the European benchmark, Sodexo SW-FR was among the top performers, up by 1.5 percent. The French hospitality company reported its first quarter sales figures and said that the “yellow vests” protests had impacted tourism in December. The company was forced to close its river cruising businesses and the restaurant at the Eiffel Tour during some of the demonstrations last month.

Tesco also rose 1.2 percent after updating the markets on its Christmas performance. The grocery retailer said Thursday that it had outperformed its competitors with a 2.2 percent increase in Christmas sales. On the other hand, Debenhams announced that it is in talks with lenders to receive fresh capital.

Osram fell to the bottom of the index, down by 6 percent. The lighting company said that there had been lower demand by auto firms.

Also in the corporate world, four former top executives of Danske Bank DANSKE-DK were sued on Wednesday by a U.S. shareholder, who accused the bank of defrauding investors, Reuters reported.

In Europe, investors keep monitoring the Brexit process ahead of next week’s critical vote. The U.K. Parliament agreed Wednesday that the government must come up with a plan-B within three days if the ‘Withdrawal Agreement’ is not approved on Tuesday.

In terms of data, the European Central Bank will be releasing its latest meeting accounts at 12.30 p.m. GMT.

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