European stocks lack momentum as China boost fades
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[June 27, 2023] By
Elizabeth Howcroft
LONDON (Reuters) -European shares struggled to maintain positive
momentum on Tuesday, after Asian stocks got a boost from China's
government saying it would support the economy, as investors focused on
concerns about the economic outlook for Europe and the United States.
Asian shares were helped by Chinese Premier Li Qiang saying that Beijing
will roll out policies to boost the world's second-largest economy.
But the positive market sentiment faltered in early European trading,
with the pan-European STOXX 600 down 0.1%.
The MSCI World Equity Index was a touch higher, up 0.1% on the day at
668.72, having fallen since the 14-month high of 689.04 reached more
than a week ago.
MSCI's Europe index was up 0.1%, London's FTSE 100 was up 0.1% and
Germany's DAX was down by less than 0.1%.
Hani Redha, multi asset portfolio manager at PineBridge Investments,
said the factors that had boosted European shares earlier in the year --
relief over the energy crisis easing and China's surprise post-COVID
re-opening -- would not last.
"Now fundamentals are going to deteriorate because of the tightening of
policy and because of the fading of these temporary tailwinds (which)
leaves markets vulnerable," he said.
Wall Street saw losses on Monday as investors increasingly bet on the
U.S. Federal Reserve keeping rates higher for longer.
The International Monetary Fund's second-in-command said on Monday that
the world's top central banks may need longer to get inflation back down
to target and a new bout of financial turbulence could make the process
even more protracted.
European Central Bank President Christine Lagarde said that euro zone
inflation could linger for some time, meaning the central bank is
"unlikely" to be able to declare an end to rate hikes in the near
future.
ABORTED MUTINY
Analysts said markets were generally unaffected on Tuesday by the
aborted mutiny by Wagner Group mercenaries in Russia over the weekend,
which appeared to reveal cracks in Russian President Vladimir Putin's
grip on power.
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![](../images/062723PIX/busine76.jpg)
The German share price index DAX graph
is pictured at the stock exchange in Frankfurt, Germany, June 26,
2023. REUTERS/Staff
Oil prices dipped, as investors focused on U.S. data due later in
the session which is expected to give indications of the U.S.
appetite for fuel during the summer driving season.
Wheat futures, which had been lifted to a four-month high at the
start of the week, declined after profit-taking.
"One other reason for the so far muted reaction to recent events is
that we are coming to the end of the month as well as the first half
of the year, with investors indulging in portfolio tweaking rather
than any significant shift in asset allocation," said Michael Hewson,
chief market analyst at CMC Markets, in a note to clients.
The U.S. dollar was a touch lower, down 0.1% against a basket of
currencies ahead of data on durable goods, consumer confidence and
new home sales, due later in the session. It hit a seven-month high
against China's yuan, as investors braced for the possibility of
China doing more to support the currency.
The euro was up 0.3% at $1.09365. The German yield curve was at its
most inverted in nearly 31 years as investors bet that a flagging
economy would lead the European Central Bank to cut interest rates
after they reach their peak around 4%.
Euro zone government bond yields were up, with the benchmark German
10-year yield at 2.332%.
The British pound was up 0.1% on the day at $1.2718.
The Japanese yen fell to its weakest since November versus the U.S.
dollar, after Japanese Finance Minister Shunichi Suzuki said sharp
and one-sided moves were observed in the currency market.
(Reporting by Elizabeth Howcroft, editing by Ed Osmond)
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