European markets are trending downwards in early trading on Monday, following on from US equities’ lower close at the end of last week, as traders look for fresh signals from central bankers at their Jackson Hole gathering towards the end of this week.
Following a disappointing end to last week for Wall Street, where the S&P 500 edged lower on Friday after a 1.5 per cent fall in the previous session, European markets have caught the subdued vibe.
The FTSE 100 is 0.2 per cent lower in early trading, while the Euro Stoxx 600 is down 0.3 per cent and the Xetra Dax is dipping by 0.5 per cent.
With immediate geopolitical tensions between the US and North Korea easing somewhat, attention turns back to the longer-term prospects for Donald Trump’s proposed tax and infrastructure measures, and their implications for equity values.
Mr Trump has decided to push hard for tax reform in a bid to court Republican support after the turmoil of recent weeks, according to senior officials.
Brent crude, the global benchmark, is holding onto last week’s late gains and hovering around $52.62 a barrel. The oil price saw its sharpest jump in four weeks on Friday, up 3.3 per cent as traders rushed to cover short positions.
Falling stockpiles are helping to push the benchmark up, according to market analysts.
Gold is 0.2 per cent up at $1,286.59 per ounce, near Friday’s highs which saw the haven asset top $1,300 for the first time since November as investors sought safety.
Ian Williams, a strategist at Peel Hunt, says:
Investors continued to wrestle last week with global geopolitical turmoil surrounding North Korea, the struggles of the Trump administration and another terror attack in Europe; hence the recent jump in measures of volatility and risk aversion. The much-cited concerns over equity valuations focus primarily on the US, where the market is still implicitly pricing in a boost from business-friendly tax reforms and infrastructure measures. If those cannot be delivered, the risks of a correction increase; the downside risks should be limited by what still looks like a supportive corporate earnings backdrop.
Asia-Pacific trading has been dominated by developments in the region on Monday, with a series of company results and announcements generating share price moves.
In Hong Kong the Hang Seng is up 0.4 per cent with gains focused in telecoms, up 2.4 per cent. The benchmark S&P/ASX 200 index is down 0.6 per cent. In Tokyo the Topix is down 0.1 per cent.
Currency moves are muted with the US dollar index — a measure of the greenback against a basket of currencies — up 0.1 per cent at 93.546. The euro and sterling are both edging down 0.1 per cent against the dollar, at $1.1744 per euro and $1.2856 per pound. The Japanese yen is little changed at ¥109.15 per dollar.
Government bond yields are steady. Ten-year US Treasuries are largely unchanged at 2.208 per cent, while the 10-year German Bund is hovering at around 0.422 per cent. The UK gilt equivalent is steady at 1.092 per cent, and the 10-year Japanese yield is flat at 0.035 per cent.
Yields on Greek government debt have dipped after credit rating agency Fitch upgraded its assessment of the country’s prospects. The Greek 10-year bond is 0.1 basis points lower at 5.61 per cent. Yields fall when prices rise.