LONDON: Global stock markets greeted 2018 in mixed fashion Tuesday, with euro and pound strength depressing Europe while Wall Street and Asia gained ground.
Trading was mostly thin as many investors were still away from their desks on extended holidays.
London and the main eurozone exchanges posted losses as the euro and pound rose against the dollar, weighing on the share prices of export-oriented multinationals.
Signs of weak US inflation weighed on the greenback amid fears that the Federal Reserve may not raise interest rates as quickly as expected in 2018, possibly allowing other central banks to catch up with rate hikes of their own.
Higher interest rates tend to support a currency.
“The US dollar is the story for the first trading day of 2018,” said James Hughes, chief market analyst at AxiTrader.
Wall Street opened mildly firmer, shaking off doubts for now about the sustainability of a strong run seen throughout 2017.
Asian stocks earlier mostly kicked off the year with gains, fuelled by strong data, improving corporate profits and hopes that US President Donald Trump’s tax cuts will fire US and world growth.
Sentiment was also boosted by news that both Chinese and Indian manufacturing activity continued to expand in December.
– ‘Bit of profit-taking’ –
In Europe, however, Frankfurt, London and Paris slid in subdued deals as investors took profits and also absorbed various manufacturing purchasing managers’ index (PMI) surveys.
“A bit of profit-taking in the mining sector and the continued weakness of the dollar appeared to be driving trading, especially in Europe, with the manufacturing data having little impact on proceedings,” Spreadex analyst Connor Campbell told AFP
London stocks sagged despite news of solid manufacturing output and order growth in December.
“Today is all about the latest PMI manufacturing surveys: China’s looked good and India is even better, while the UK posted a decent figure,” noted analyst Russ Mould at online stockbroker AJ Bell.
He sounded caution, however, over global oil prices which topped $67 per barrel in early deals on the back of a weaker dollar, unrest in crude giant Iran and a pause in the number of rigs coming online in the United States.
“The one topic that is potentially being overlooked is oil,” Mould told AFP.
“Brent has reached $67 a barrel almost unnoticed, even if that is near a three-year high, and higher fuel costs nearly always act as a brake on the economy at some stage, so this issue merits closer attention,” he cautioned.
Investors were meanwhile keeping an eye on the release of key US jobs figures at the end of the week, which will provide fresh clues about the strength of the world’s biggest economy.
– Dollar wobbles –
On currency markets, the dollar suffered further selling, with analysts pointing to profit-taking after the passage of the much-anticipated US tax cuts, as well as expected monetary tightening by other central banks that will align them with the Federal Reserve.
Greg McKenna, chief market strategist at AxiTrader, said the euro was rising as “traders are making the bet that the (European Central Bank) will simply follow the Fed in the year ahead and end quantitative easing and then move toward rate hikes”.
The single currency held above $1.20, sitting at levels not seen since September, while the pound was also trading at around three-and-a-half-month highs.
Source: Brecorder.com
