European equities slip after Tokyo hits reverse

LONDON: Europe’s stock markets dipped Thursday after Tokyo slid from a 26-year peak, with London also hit by a disappointing strategy overhaul from fashion giant Burberry.

Frankfurt and Paris indices retreated despite news that the European Union hiked its 2017 eurozone economic growth forecast to 2.2 percent from 1.7 percent.

However, the bloc slashed Britain’s forecast to 1.5 percent from 1.8 percent as Brexit uncertainties weigh, hitting London sentiment.

In Asia, Japanese stocks finished in the red, suffering a sharp reverse after earlier hitting fresh 26-year highs, while most other Asian indices also fell.

“Markets took their cue from a volatile session in Japan, where the Nikkei performed an impressive handbrake turn after hitting fresh multi-year highs,” said IG analyst Chris Beauchamp in London.

“This sudden drop after the relentless gains over the past two months caught investors on the hop.”

Tokyo’s Nikkei had ploughed two percent higher in the first session, supported by broad optimism in the global economy and healthy corporate results that have helped fuel a run across global equities.

However, analysts said investors had decided the rally was running a little too hot — Tokyo has piled on more than 20 percent since early September — and turned sellers later on.

The index closed down 0.2 percent, having fallen as much as 1.7 percent at one stage.

“There was a major move to the downside in the Nikkei overnight after Chinese President Xi hinted at increased trade with the US,” noted CMC Markets analyst David Madden.

“The prospect of China moving economically closer to the US, possibly at the cost of Japan, brought about a fast decline in the Japanese stock market.”

China and the United States meanwhile signed more than $250 billion in business deals, including $37 billion worth of Boeing planes, as US President Donald Trump held talks with Chinese counterpart Xi Jinping in Beijing.

Trump criticized Beijing’s “one-sided and unfair” trade surplus with his country, but said he did not blame China for the situation, instead hitting out at past White House administrations “for allowing this out-of-control trade deficit to take place and to grow”.

On the upside in Asia, Shanghai rose 0.4 percent and Hong Kong advanced 0.8 percent, with traders cheering forecast-beating inflation figures from China that provided fresh hopes the huge economy is stabilising.

– Burberry overhaul spooks investors –

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Back in London, shares in British luxury fashion giant Burberry slumped on disappointing earnings and a costly strategy overhaul.

The group’s share price tumbled 9.32 percent to £18, topping London’s fallers board.

“Burberry posted a 24-percent jump in first-half pre-tax profits, but it still missed expectations,” noted Madden.

“Traders were more interested in the company’s plans — which involves focusing more on the high end of the luxury goods market. The stores they are retaining will be revamped at a high cost, and this is spooking traders.”

– Key figures around 1100 GMT –

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London – FTSE 100: DOWN 0.1 percent at 7,525.47 points

Frankfurt – DAX 30: DOWN 0.1 percent at 13,368.90

Paris – CAC 40: DOWN 0.1 percent at 5,464.62

EURO STOXX 50: DOWN 0.1 percent at 3,651.71

Tokyo – Nikkei 225: DOWN 0.2 percent at 23,868.71 (close)

Hong Kong – Hang Seng: UP 0.8 percent at 29,136.57 (close)

Shanghai – Composite: UP 0.4 at 3,427.79 (close)

New York – DOW: FLAT at 23,563.36 (close)

Euro/dollar: UP at $1.1604 from $1.1594 at 2200 GMT

Pound/dollar: DOWN at $1.3087 from $1.3115