Stocks turn red, pound finds some peace
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[January 17, 2019]
By Marc Jones
LONDON (Reuters) - Concern over China's economic outlook and possible
U.S. 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 <.SXAP> fell as much as 1.5 percent after U.S. 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 <.SX8P> was under pressure too after one of world's biggest chip
producers, Taiwan Semiconductor <2330.TW>, 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 U.S.
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 <ESc1> pointed to Wall Street starting 0.3 percent lower.
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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 <.CSI300> had ended down 0.55 percent, led lower
by a decline in the country's second-largest home appliances maker, Gree
Electric <00065.SZ>, after it warned of slower profit growth as the
economy loses steam.
Chinese Premier Li Keqiang promised increased government investment this
year and the country's central bank injected more cash into the
financial system, bringing the amount for the week to 1.14 trillion yuan
($168.74 billion).
Stoking additional caution however was news that U.S. lawmakers
introduced bills on Wednesday that would ban the sale of U.S. chips or
other components to Huawei <HWT.UL> or other Chinese telecoms firms that
violate U.S. sanctions or export control laws.
That came shortly before the Wall Street Journal reported federal
prosecutors were investigating allegations that Huawei stole trade
secrets from U.S. businesses.
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![](../images/011719PICS/busine27.jpg)
New one pound
coins, which come into circulation today, are seen in London,
Britain March 28, 2017. REUTERS/Neil Hall
![](http://archives.lincolndailynews.com/2019/Jan/17/images/ads/current/heartland_lda_CNA_121718.png)
Separately, Handelsblatt reported the German government is actively considering
stricter security requirements and other ways to exclude Huawei from a buildout
of fifth-generation (5G) mobile networks.
Also lurking were worries the U.S. government shutdown was starting to take a
toll on its economy. White House economic adviser Kevin Hassett said the
shutdown would shave 0.13 percent off quarterly economic growth for each week it
goes on.
PLAN B OR NOT PLAN B
As expected, British Prime Minister Theresa May narrowly won a confidence vote
overnight and invited other party leaders for talks to try to break the impasse
on a Brexit agreement.
An outline for Plan B is due by next Monday and markets are currently assuming
that with no easy way forward for May she will have to extend the date of
Britain's exit from the European Union past the scheduled March 29.
"Nothing has happened in the last 24 hours to dissuade us from the view that we
are headed in the direction of an Article 50 delay, a softer Brexit or no Brexit,"
said Ray Attrill, head of FX strategy at NAB.
All of which left the pound at $1.2872 <GBP=>, and though it was still short of
Monday's peak of $1.2929, it did manage a new seven-week high of 88.32 pence
against the euro before steadying <EURGBP=>.
The U.S. dollar was mixed, easing against the yen to 108.80 <JPY=> but flat
versus the euro at $1.1400 <EUR=>. The dollar index was barely moving too at
96.043 <.DXY> as a drop in euro zone bond yields also helped drag down those on
Treasuries.
In commodity markets, palladium <XPD=> hit record highs thanks to increasing
demand and lower supply while gold <XAU=> was little changed at $1,294.91 per
ounce.
Oil prices eased as traders worried about the strength of demand in the United
States after its gasoline stockpiles grew last week more than analysts had
expected.
U.S. crude futures fell 38 cents to $51.93 per barrel. Brent slipped 40 cents to
$60.92.
(GRAPHIC: Asia stock markets - https://tmsnrt.rs/2zpUAr4)
(GRAPHIC: Asia-Pacific valuations - https://tmsnrt.rs/2Dr2BQA)
(GRAPHIC: The chips (makers) are down - https://tmsnrt.rs/2HieTMX)
(Additional reporting by Wayne Cole in Sydney; Editing by Catherine Evans)
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