Major European stock markets fell yesterday, with Wall Street’s main indices also touching multi-month lows, at the start of a busy week packed with central bank interest rate decisions.
The London stock market, already beset with Brexit concerns, took an additional knock after British online fashion retailer ASOS issued a profit warning.
London’s blue-chip FTSE 100 fell 1.1% to 6,773.24, as did the CAC 40 in Paris, while the DAX 30 in Frankfurt shed 0.9% at 10,772.20 points at the close yesterday.
On Wall Street, both the Dow and S&P, which have fallen into correction territory, touched multi-month lows before paring their losses. The Nasdaq composite briefly rallied into positive territory.
The US Federal Reserve will conclude its rate-setting policy meeting tomorrow and while expectations are for another hike in borrowing costs, comments from chairman Jerome Powell will be closely watched for an idea of its plans for 2019.
The Bank of England will follow suit on Thursday with its latest monetary policy decision.
The European Central Bank last week held interest rates steady as it ended its crisis-fighting economic stimulus known as quantitative easing (QE).
“There isn’t a lot of mystery behind the negative bias,” said Patrick O’Hare at Briefing.com. “Trade uncertainty, political uncertainty, growth uncertainty, and monetary policy uncertainty continue to provide a rationale to reduce risk exposure.”
There is still caution on trading floors after Friday’s sharp sell-off fuelled by concerns over China’s economy, and despite a tweet from US President Donald Trump suggesting a trade deal could be hammered out between Washington and Beijing.
While there are signs the world’s top two economies are beginning to move towards a resolution in their bitter tariffs spat, there are increasing concerns about the global outlook following another dour set of indicators out of China.
A string of below-par readings this year have highlighted a slowdown in the Asian giant and observers are forecasting leaders will unveil fresh measures to pep up the economy, which is on course for another year of relatively weak growth.
Trump added to the uncertainty on monetary policy by calling publicly on the Fed not to raise interest rates.
“It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike,” Trump wrote on Twitter. “Take the Victory!”
Meanwhile in corporate action, shares in ASOS plunged over 40% in London after the British online fashion retailer warned over sales and profits after experiencing a “significant deterioration” in trade in the run-up to the key Christmas season.
ASOS chief executive Nick Beighton said November had been the “most difficult month relative to expectations for five years” – as he blamed Brexit, weak consumer confidence and deep price discounting for the shock warning.
The news sparked alarm among retailers already struggling with sales in their physical stores.
As a result, shares in British clothing group Next sank 4.9% while bellwether Marks & Spencer fell 4.6%.
“Looking more broadly this is also a potential warning sign for online retailers who have hitherto held up relatively well compared to traditional High Street chains in what has no doubt been a challenging year for the sector,” said David Cheetham, chief market analyst at XTB online trading firm.
A trader monitors share prices at the London Stock Exchange. London’s blue-chip FTSE 100 fell 1.1% to 6,773.24 points yesterday.
