Here’s What to Watch in European Stocks This Morning
(Bloomberg) -- Good morning. Here’s what we are watching ahead of the market open in Europe:
After European stocks hit a six-month low on Wednesday, the U.S. followed by suffering its worst sell-off since February and Asia has followed suit, with shares across the region battered. U.S. President Donald Trump blamed the sell-off on the Federal Reserve “going loco” on its interest rate increases this year. Traders, meanwhile, said a bad day for stocks was overdue and there’s no need to panic. The question is whether Europe will show some signs of recovery or at least a calmer picture, or if screens will remain bathed in red. FTSE 100 futures are pointing to the latter, indicating the U.K. market will open more than 1% lower.
Oil prices had been holding steady near multiyear highs, but the turmoil in global stock markets is spreading and crude is staring down the barrel of its worst 2-day drop since July amid worries the trade war is worsening. The U.S. Energy Information Administration will issue inventory numbers on Thursday, and those data will either provide some relief or exacerbate the sell-off. Almost certainly, oil stocks are unlikely to continue their strong recent run when European markets get started.
Every day brings more excitement and unpredictable moves in Italian government bonds. Mirroring the action a day earlier, Wednesday saw BTP yields surge higher before narrowing again later in the day. Italian banks, meanwhile, had a good day after Goldman Sachs said political developments in Italy will have a negative but not “very profound” impact on the country’s lenders. Still, the FTSE MIB may be in for another rocky day should further headlines flow from either Italy’s populist leaders or from critical European Union voices. Also note Italy is due to sell bonds across four maturities on Thursday, another chance to take the temperature of the market.
The impending cabinet reshuffle of President Emmanuel Macron’s government has been pushed back and might not happen until the weekend or next week, increasing the uncertainty about the scale of changes Macron will make. The president will be taking part in a summit in Armenia on Thursday, so is likely to face a few questions about the plans. Watch French stocks in which the government has a stake for any reaction, including the likes of energy group EDF, airplane maker Airbus and airport operator Aeroports de Paris.
U.K. House Prices
A topic on the lips of most Brits much of the time, housing costs will be in focus again after data from the Royal Institution of Chartered Surveyors showed the slump in prices in London is weighing on the national market. Most of the pain is being felt in the capital and in the south east and East Anglia. That could cast yet another pall over the homebuilding and real-estate agency sector, which had a similarly bad update on the U.K. capital’s market on Thursday via Telford Homes. The housing developer’s shares slumped after the company said it was finding it harder to shift homes that cost more than 600,000 pounds ($790,000).
©2018 Bloomberg L.P.