LONDON: Europe’s major stock markets eased on Friday, weighed down by a firmer euro after inflation data in the US showed that price pressures remained subdued in the world’s biggest economy, dealers said.
After holding steady for most of the session, all of Europe’s main stock indices fell into the red in the afternoon following the release of new inflation data in the US.
On the face of it, soaring fuel prices drove US inflation to an eight-month high in September, but the spike in gasoline prices was likely tied to Hurricane Harvey. And stripped of such volatile factors, core inflation remained tame, the data showed.
The dollar fell as a result, pushing stock prices on Wall Street tentatively higher.
But in Frankfurt, the German blue-chip DAX index, which topped the 13,000-point mark on Thursday, was flat, the CAC 40 index in Paris shed 0.2 percent and London’s benchmark FTSE 100 index of top blue-chip companies lost 0.3 percent, after hitting a record closing peak the previous day with traders gripped by Brexit newsflow.
“The tired dollar collapsed like a house of cards on Friday, after US CPI figures and retail sales for September failed to pack a punch,” said FXTM analyst, Lukman Otunuga.
“Although US consumer prices rose 0.5 percent, the largest increase seen in eight months on the back of rising gasoline prices, underlying inflation remained subdued. While markets are still expecting the Federal Reserve to raise interest rates in December, concerns over prolonged periods of depressed inflation may cloud the prospect of higher US interest rates in 2018,” the expert said.
London stocks had been catapulted Thursday to an all-time closing pinnacle on the weak pound, which boosts earnings of exporters.
Sterling initially sank after EU negotiator Michel Barnier warned that Britain and Brussels are stuck in a “disturbing” deadlock over the Brexit divorce bill.
However, the currency then rebounded as German newspaper Handelsblatt reported that Britain could be given a two-year extension to complete Brexit.
The British unit continued to regain its composure on Friday.
“Sterling is on quite the rollercoaster ride, recovering from Michel Barnier’s ‘disturbing deadlock’ comments thanks to a report in Handelsblatt,” noted Spreadex analyst Connor Campbell.
– ‘Transitional’ Brexit deal? –
“Yesterday afternoon’s pound-plunge was sizable enough to send the FTSE to a fresh all-time closing high,” the expert said.
“Yet by the evening, the currency had clawed back its losses, and then some, after Handelsblatt claimed the EU are prepared to offer the UK a two-year transitional deal, where the latter would meet all of its financial obligations but give up its voting rights,” Campbell said.
There were cautious gains in Asia on Friday after an underwhelming session overnight in New York, but Tokyo pushed ahead after hitting a 21-year high earlier in the week.
World oil prices rebounded sharply Friday on bullish trade data in China, which is the world’s top energy consuming nation.
Crude futures also pushed higher before US President Donald Trump’s speech later Friday, when he is expected to unveil a more aggressive strategy to check the growing power of key OPEC oil producer Iran.
