European share declines limited after another Wall Street sell-off

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European shares posted limited losses at the open on Friday after a fresh sell-off on Wall Street, which has now entered a correction with the benchmark S&P 500 and Dow industrials falling more than 10 per cent from their January 26tg record highs.

Europe’s STOXX 600 share index fell 0.4 per cent in early trading with all European bourses and sectors trading in negative territory.

The Stoxx had already fallen 1.6 per cent on Thursday, with declines accelerating towards the end of the trading day.

“It would appear that the brief respite for stocks seen in the middle of the week turned out to be the eye of the storm as once again rising bond yields prompted a further bout of selling across the board, not only in the US last night but in Asia again this morning”, said Michael Hewson, chief market analyst at CMC Markets.

Utilities stocks, which are expected to suffer as interest rates rise, were the worst performers and the sector’s index fell 1 per cent.

French asset manager Amundi posted the worst performance, losing 4.7 per cent after publishing its annual results and new financial targets. A.P. Moller-Maersk missed fourth-quarter profit expectations and fell 4.3 per cent. Belgium’s Umicore was the top-gainer after raising €892 million in equity for new investments in rechargeable battery materials at a discount of only 2.7 per cent to Thursday’s closing price.

Shares in French cosmetics group L’Oreal rose 1.8 per cent after its fourth-quarter sales beat expectations and comments by its chief executiveregarding its intentions on Nestle’s stake further buoyed the stock.

Asian shares also sank on Friday, with Chinese equities on track for their worst day in two years, as fears of higher US interest rates shredded global investor confidence.

On top of pressure from the drop in global shares, Chinese equities were weighed down as investors sought to stay liquid ahead of the Lunar New Year holidays and pressure was felt to meet rising margin calls.

The Shanghai Composite Index tumbled 6 per cent to its lowest since May 2017, and the blue chip CSI300 index dived as 6.1 per cent. Both indexes were on track for their largest single-day losses since February 2016.

Frank Benzimra, head of Asia equity strategy at Societe Generale in Hong Kong, said Chinese shares slid mostly because of the US correction but he had some China-specific worries.

He said he now is neutral on China equities “due to two concerns: valuations on China-consumer related industries and execution risks on deleveraging (more specifically financial deleveraging)”.

Japan’s Nikkei shed 2.9 percent, en route for a weekly loss of 8.6 per cent – its biggest since February 2016.

MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 2.2 per cent to a two-month low.

The index, which hit a record high on January 29th, was on track for its sixth straight day of losses and stood to fall 7.6 per cent on the week.

“The correction phase in equities could last through February and possibly into March,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.


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