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Stocks turn red, pound finds peace
January 18, 2019
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LONDON: Concern over China’s economic outlook and possible US tariffs on European cars dragged stocks lower on Thursday, while an anti-climactic end to the latest chapter in the Brexit saga offered sterling a moment’s peace.

Fresh news had been thin on the ground during the European morning, but dealers had more than enough to digest from the last 24 hours to follow Asia’s lead and nudge the main bourses into the red.

Europe’s carmakers fell as much as 1.5 per cent after US Senate Finance Committee Chairman Charles Grassley said he thought Donald Trump was “inclined” to impose tariffs on European cars to win better terms on agriculture.

Banks were hit by disappointing Societe Generale results and the tech sector was under pressure too after one of world’s biggest chip producers, Taiwan Semiconductor, forecast its steepest drop in revenue in a decade.

“There is some focus on the Grassley comments in relation to auto trade tariffs and also reference to there not being much progress in the US China negotiations last week,” said Bank of Tokyo Mitsubishi strategist Derek Halpenny.

“There has obviously been a lot of optimism (in markets) since the start of the year and risk appetite has had a pretty good run, but this will place a few question marks over that.” MSCI’s broadest index of world stocks was fractionally lower having hit a five-week high. Markets like Japan had dithered in both directions while futures pointed to Wall Street starting 0.3 per cent lower.

Some took heart at Beijing’s confirmation that Chinese Vice Premier Liu He will travel to the United States on Jan. 30 for more negotiations with Washington, but it wasn’t enough to tip the balance more broadly.

China’s blue-chip index had ended down 0.55 per cent, led lower by a decline in the country’s second-largest home appliances maker, Gree Electric, after it warned of slower profit growth as the economy loses steam.

Agencies

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