Global equity markets faltered yesterday, pulled lower by Wall Street, where stock prices fell following lacklustre Chinese economic data and mixed earnings from leading US retailers ahead of the key holiday shopping season.
Stronger-than-expected German growth data boosted the euro, which in turn weighed on stock prices in Frankfurt and in Paris, where the main indices ended.
But London managed to hold steady, propped up by bright news from supermarket giant Tesco and mobile phone titan Vodafone, with extra support from a weak pound.
A rally in the euro “has dented the continental markets. The stronger-than-expected growth rate in Germany propelled the (single currency) higher, and in turn dragged the DAX and CAC 40 lower,” said CMC Markets analyst, David Madden.
Germany’s economy grew at a faster pace than expected in the third quarter, fuelling calls for Europe’s powerhouse to loosen the purse strings and invest more.
At the same time, “the slight weakness in the pound has assisted the FTSE 100, and the positive results from Vodafone also propped up the British market as the stock is a large component of the index,” CMC anlayst Madden said.
Oanda analyst Craig Erlam said there were signs “that markets are starting to look a little overextended.”
Following a relatively uninterrupted rally in equity markets over the last couple of months, many market observers were now beginning to “question whether a correction of some kind is both warranted and healthy,” the expert said.
Tesco topped London’s risers’ board, rallying 6.2% to 188 pence, after Britain’s competition regulator gave the provisional green light to the supermarket giant’s takeover of wholesaler Booker worth £3.7bn ($4.8bn, €4.2bn).
Vodafone stock surged 5.4% to 228 pence after the mobile phone group revealed it rebounded back into first-half net profit on cost-cutting and keen demand.
London won extra support from the pound, which slid as official data showed Britain’s annual inflation rate held at a five-year high of 3.0% in October.
A weak pound tends to boost the share prices of multinationals.
London’s FTSE 100 closed flat at 7,414.42 points, Frankfurt’s DAX 30 ended 0.3% down at 13,033.48 points, Paris’ CAC 40 shed 0.5% at 5,315.58 points and the EURO STOXX 50 slipped 0.5% at 3,556.38 points, at close.
Meanwhile, investors awaited movement on stalled US tax cuts with fears growing that the reform push could come off the rails.
After weeks of gains fuelled by strong earnings and optimism about the global economy, world markets have been tempered in recent days as dealers cash out and valuations sit unnervingly high.
World markets had surged on hopes for lower taxes when Donald Trump was elected US president one year ago.
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