European bourses fall after selling on Wall Street sets tone

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Thursday 10.45 GMT

What you need to know

  • Falls for European stocks intensifies, tracking late sell-off on Wall Street
  • Wall Street futures point to narrower losses at the start of US trade
  • Asia equities mainly higher after volatility eases off around the world
  • Debt market steadies following bumpy session
  • Sterling steady ahead of Bank of England rate call and inflation report
  • Renminbi down 1%, fading from highest since 2015

Leading quote

“We expect volatility to increase in 2018, and would urge investors to remain cautious of leveraging positions too far,” says Eoin Murray, head of investment at Hermes.

“Central bank tightening, or at least the end of post-crisis monetary accommodation, will undoubtedly prove challenging, and we exist in a period where the market is acutely vulnerable to a change in circumstances.”

Hot topic

The bout of volatility that shook global stock markets is continuing to set a nervous tone to trade after it ended a sustained period of calm and a record-breaking rally for a range of indices.

European bourses are back under pressure, tracking a late sell-off on Wall Street as investors look past a steadier showing in Asia.

London’s FTSE 100 is down 0.8 per cent, eroding the previous session’s overall gain of 1.9 per cent. Frankfurt’s Xetra Dax 30 is down 1.2 per cent and the Europe-wide Stoxx 600 weaker by 0.6 per cent.

Futures trade is pointing to narrower opening losses for in the US. The S&P 500 is expected to fall 0.2 per cent, having ended the previous session down 0.5 per cent, coming off intraday gains of up to 1.2 per cent. The index is more than 7 per cent below the record high it set on January 26. The Nasdaq Composite and Dow Jones Industrial Average painted a similar picture, ending down 0.9 per cent and 0.1 per cent, respectively.

The Vix volatility index is as 28, keeping away from its peak reading of just over 50 reached at the height of the sell-off.

Asia Pacific equities were mainly higher, with gains in Japan and Hong Kong but declines for China’s stocks.

The Topix in Tokyo closed up 0.9 per cent, taking its recovery from Tuesday’s four-month intraday low to over 3 per cent.

Hong Kong stocks edged up 0.4 per cent but the gains were broad. The index, while more than 7 per cent lower for February, remains 1.4 per cent higher for 2018. Seoul’s Kospi Composite was up 0.5 per cent.

On mainland China, the CSI 300 of major Shanghai and Shenzhen companies fell 1 per cent.

Fixed income and forex

The onshore renminbi is markedly lower — down 1 per cent at Rmb6.355 per dollar, its biggest fall in 13 months. It takes the currency, which is permitted to trade 2 per cent either side of a daily mid-point set by the People’s Bank of China, down from its strongest level in over 2 years, touched during the previous session.

The dollar index is up 0.2 per cent at 90.446, keeping it around a 10-session high. The euro is down .2 per cent at $1.2233.

The pound is also flat, at $1.3875, ahead of a UK interest rate call at midday, at which policy is expected to be left on hold. The Bank of England will also issue its quarterly Inflation Report, which will set the tone for the outlook on rates and is expected to include increased growth forecasts.

The yield on US 10-year Treasuries is down 1 basis point to 2.824 per cent, after a rise of 9bp over the previous session. Bond yields rise as prices fall. That on the German equivalent is up 1bp at 0.744 per cent.

Commodities

Oil prices dropped to their lowest point in 2018 after US government data showed US crude stockpiles rose faster than expected last week. Brent crude is down 0.7 per cent to $65.07 a barrel.

Gold is off 0.4 per cent at $1,312 an ounce.

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