Tuesday, 11 August 2015 17:43
LONDON: European stocks fell Tuesday after a surprise devaluation of the yuan affected key exporters to China such as auto and luxury goods groups, offsetting news of a technical agreement to Greece’s bailout deal.
A survey indicating that investor sentiment in Germany fell sharply in August also weighed.
London’s benchmark FTSE 100 index dropped 0.67 percent to stand at 6,691.33 points in late morning deals.
Frankfurt’s DAX 30 slid 1.23 percent to 11,462.88 points and the CAC 40 in Paris lost 1.11 percent to 5,137.71 compared with Monday’s close.
Athens’ main index grew 1.79 percent to 702.62 points.
In foreign exchange, the euro rose to $ 1.1031 from $ 1.1019 late in New York on Monday.
“European equities on the back foot… in reaction to China’s currency devaluation and despite proximity to a Greek bailout deal,” said Mike van Dulken, head of research at Accendo Markets.
“While markets normally welcome any form of China stimulus with open arms, today’s move in the wake of truly awful weekend trade data is being interpreted as admission of growth slowing by even more than those rather questionable official statistics are to have us believe.”
China on Tuesday announced a sharply lower daily reference rate for the yuan against the US dollar, saying it was part of moves to make its exchange rate regime more market-oriented.
The 1.86 percent cut was the largest since the yuan was unpegged from the greenback in 2005.
Weak trade and inflation data released last weekend reinforced concerns that growth is slowing in the world’s second largest economy.
The devaluation weighed on several sectors, notably the auto and luxury goods markets that rely heavily on Chinese demand.
In Paris, shares in LVMH Moet Vuitton shed 3.87 percent to 167.45 euros, Peugeot slid 3.59 percent to 17.70 euros and Renault gave up 3.15 percent to 85.40 euros.
In Frankfurt, Daimler shed 3.83 percent to 81.04 euros and BMW retreated by 3.78 percent to 89.87 euros.
Burberry meanwhile slumped 2.74 percent to 1,563 pence in London, where miners continued to fall under the pressure of weaker Chinese growth, with Glencore down 2.14 percent at 201.80 pence and BHP Billiton losing 1.74 percent to 1,188 pence.
The news by China overshadowed developments within the eurozone — notably that Greece has reached a technical deal on a multi-billion bailout with its international creditors after marathon talks.
“An agreement was reached,” a government source told AFP, with Finance Minister Euclid Tsakalotos briefly telling reporters that “one or two details” remained to be worked out during the day.
European officials later noted, however, that the accord was a “technical level agreement… What we don’t have is a political agreement.”
The talks between ministers and the ECB, the International Monetary Fund and the European Stability Mechanism aim to finalise the list of new reforms required of the Greek government in exchange for a lifeline of what officials in Athens Tuesday said was “around 85 billion” euros ($ 93.8 billion).
The deadline for Greece to reach an agreement on its third bailout is August 20, when it must repay 3.4 billion euros to the European Central Bank.
German investor sentiment meanwhile dropped this month owing to nagging geopolitical uncertainty clouding the outlook for Europe’s top economy, a leading survey found on Tuesday.
The widely watched investor confidence index calculated by the ZEW economic institute sank 4.7 points to 25.0 points this month, ZEW said in a statement.