European stock markets were lower yesterday, taking their lead from softer prices on Wall Street, as investors wound down and took profits at the end of year.
At the close of trade in Europe, London’s benchmark FTSE 100 index was down 0.8% at 7,587.05 points compared with Friday.
In the eurozone, Frankfurt’s DAX 30 shed 0.7% to 13,249.01 and the Paris CAC 40 lost 0.9% to 5,982.22 points.
On the other side of the Atlantic, New York’s the Dow – which ended last week on a fresh record high – was showing a mid-session loss of 0.6%.
Earlier in Asia, Tokyo’s Nikkei stocks index closed down 0.8% as investors cashed in ahead of the New Year holidays, but the final day of trading still saw the benchmark end up 18.2% from a year earlier.
“Investors appear to be growing a tad apprehensive about chasing the record-setting US equity market... into year-end,” said AxiTrader market strategist, Stephen Innes.
OANDA analyst Edward Moya described trading as “light” but said that “expectations remain in place for US stocks to continue march higher” at the start of 2020.
The US Federal Reserve “has clearly signalled they will not be tightening anytime soon, the US consumer continues to impress, and as fears of both a complete collapse with global trade talks and Brexit have abated,” he said.
Briefing.com analyst Patrick O’Hare similarly believed that the declines seen on Monday would not undo the strong rally of recent weeks.
These past few weeks were “a terrific turn in a terrific quarter (+8.8%) that is ending a terrific year,” he said.
Analysts attribute the successive series of US records to upbeat investor sentiment based on a lower risk of recession in the immediate future, a mellowing of US-China trade tensions, and accommodative monetary policy.
In Asia, investors will be watching for key policy announcements in the region later this week.
North Korean leader Kim Jong-un is set to give his New Year’s speech tomorrow, with all eyes on nuclear-armed Pyongyang’s threat of a “new way” after its end-of-year deadline for sanctions relief from the US, analysts said.
Chinese President Xi Jinping is also scheduled to give a New Year’s address.
Meanwhile, thin end-of-year volumes exacerbated broad weakness in the US dollar yesterday, which dipped for three straight sessions and on Friday suffered its biggest one-day fall since March.
The dollar index, which measures the currency against a basket of six rivals, weakened 0.22% to 96.708 in North American trade. With Friday’s loss, the index’s gains for the year have shrunk to around 0.6%, compared to growth of about 4.4% in 2018.
“We’ve had a downdraft in the dollar for the last three-four sessions. It seemed to have accelerated beginning Friday and into today,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital markets.
“I don’t think there’s any fundamental story behind it. Maybe the market stocked up a little bit on long dollar (positions) before the turn, and now there doesn’t seem to be a need for the position. And so it’s bleeding out of a very thin market.”
Some analysts argued the move was a continuation of a trend of weaker demand for dollars on increased optimism about US-China trade relations and the global growth outlook. Improved sentiment, which discourages investors from buying dollars as a safe-haven asset, drove the euro to a 4-1/2-month high of $1.121 yesterday. It was last up 0.22% at $1.120.
Signs that the eurozone economy has turned a corner have lifted the EU single currency in recent weeks.
“The main drivers of the weaker dollar have likely been risk appetite holding up in the wake of US comments pertaining to a Phase 1 trade deal recently, as well as the US Federal Reserve’s continued repo operations, which have recently been undersubscribed,” MUFG analysts said.
Chinese Vice Premier Liu He will visit Washington this week to sign the Phase 1 trade deal with the United States, the South China Morning Post reported yesterday.
China’s yuan strengthened to touch 6.9742 in the offshore market, its highest since December 13.
Sterling was last trading 0.34% stronger against the dollar at $1.312.
Against the euro, the pound recovered earlier losses and was last up 0.08% at 85.36 pence. Concerns that Britain is headed for a disruptive “hard Brexit” at the end of 2020 had been hurting the pound since mid-December.
from Gulf Times https://ift.tt/2Q8DsP0
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