European Markets Open Slightly Lower Amid Trade War Anxiety

  • The pan-European Stoxx 600 edged down around 0.15 percent shortly after the opening bell, with most sectors and major bourses in negative territory.
  • Market focus is largely attuned to the ongoing U.S.-Sino trade row, with investors concerned that the dispute could soon derail a rare period of synchronized global growth.

European stocks opened slightly lower Wednesday morning, amid elevated tensions between the U.S. and China over looming trade tariffs and investment restrictions.

The pan-European Stoxx 600 edged down around 0.15 percent shortly after the opening bell, with most sectors and major bourses in negative territory.

Market focus is largely attuned to the ongoing U.S.-Sino trade row, with investors concerned that the dispute could soon derail a rare period of synchronized global growth. At the end of the trading week, Washington is set to impose tariffs on $34 billion worth of goods from Beijing. China is then expected to respond with charges of its own on U.S. products.

In Asia, equities slipped amid escalating fears of a full-blown trade war. MSCI’s broadest index, excluding Japan, edged around 0.2 percent lower on Wednesday.

Stateside, Wall Street shares gave up early gains to close lower ahead of the Independence Day holiday on Wednesday. Technology shares came under pressure, with Facebook falling over 2 percent after the Washington Post reported a federal probe on the data breach linked to Cambridge Analytica had been broadened.

A look at the performance of the regions’ main equity benchmarks shows what a difference the imbalance makes. While the S&P 500 is up about 2 percent this year, the Stoxx Europe 600 is down more than 2 percent. But if you exclude tech and telecom services shares from the S&P 500, the gap shrinks significantly, with the U.S. gauge falling 0.6 percent.

And even though European tech stocks are one of the region’s best-performing sectors this year, their share in the Stoxx Europe 600 is a meager 4.7 percent, compared with 26 percent in the S&P 500.

The comparison between the two benchmarks is also not in Europe’s favor on a longer-term horizon, with the S&P 500 up about 120 percent over the past 10 years and the Stoxx 600 gaining 34 percent. European profit growth is seen at 6.1 percent this year and 8.6 percent in 2019 compared with 23 percent for the U.S. companies in 2018 and 11 percent next year.

BUY S&P 500 AT: 2719.55, TAKE PROFIT AT: 2741.40, STOP LOSS AT: 2704.31

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