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European Stocks Continue To Exhibit Weakness Despite Coming Off Early Lows

stockmarkets dec19 17sep20 lt

Despite coming off early lows, European markets continued to languish in negative territory with notable losses in early afternoon trades on Thursday.

The Federal Reserve Chairman Jerome Powell's warning that the economic downturn due to the pandemic is "the most severe in our lifetime" and that more fiscal stimulus might be needed to sustain economic recovery weigh continued to weigh on sentiment. The Fed left its key rates unchanged as expected and said rates will be low through 2023.

Meanwhile, the Bank of England has left interest rates unchanged and maintained its current level of asset purchases.

The nine-member Monetary Policy Committee unanimously voted to hold the interest rate at 0.10 percent, as widely expected. The bank had altogether reduced the rate by 65 basis points at two unscheduled meetings in March.

The bank retained the size of the asset purchase programme at GBP 745 billion, and said the existing stance on monetary policy remains appropriate and that it does not intend to tighten policy until there is clear evidence that significant progress is being made in achieving the 2% inflation target sustainably.

The pan European Stoxx 600 was down 0.7% at 370.49. The U.K.'s FTSE 100, which tumbled to 5,998.69 at the start, was lower by 0.46% at 6,050.71. Germany's DAX and France's CAC 40 were down 0.72% at 13,159.35 and down 0.75% at 5,037.61, respectively.

Switzerland's SMI, which plunged to 10,438.61 in early trades, was down 0.38% at 10,512.14.

Automobile and bank stocks were among the most prominent losers in the European markets.

In Germany, Adidas, Continental, Infineon Technologies, Linde, Allianz and Deutsche Bank were down1.5 to 2%. Thyssenkrupp, Volkswagen, Daimler and Munich RE were also notably lower.

Fresenius surged up more than 3%. Lufthansa gained about 1.6%, while Siemens, Fresenius Medical Care, Vonovia and Covestro advanced 0.5 to 1%.

In the French market, Unibail Rodamco plunged more than 8.5%. Renault declined by about 3% and Peugeot lost 2.1%.

STMicroElectronics, Valeo, Credit Agricole and BNP Paribas were lower by 1.5 to 2%. On the other hand, Technip rose nearly 5%, Arcelor Mittal moved up 3% and Airbus Group gained 2.3%.

In the U.K. market, HSBC Holdings was down nearly 4%. Barclays slid nearly 3%, while Standard Chartered and Lloyds Banking Group were lower by about 2%.

BHP Group, Informa, Carnival, Melrose, Diageo, TUI and IAG lost 2 to 3%. Rio Tinto, Standard Life, Royal Dutch Shell and Tesco were also notably lower.

Royal Mail was gaining nearly 5%. Next shares rose more than 4.5% after the company raised its profit outlook. Ocado Group, Segro, Rentokil Initial, ITV and Ferguson were among the other prominent gainers.

Data from the European Automobile Manufacturers Association, or ACEA, showed car registrations in Europe decrease 18.9% year-on-year in August, following a 5.7% drop in July.

Switzerland's exports rose for the third straight month in August and surpassed the CHF 18 billion mark for the first time since March, data from the Federal Customs Administration showed. Exports increased by a real 2.9% month-on-month in August, following a 2% rise in July, while imports declined 1.3% monthly in August, after a 0.5% rise in the previous month.

According to the Federation of the Swiss Watch Industry, watch exports declined 11.9% year-on-year in August.

Final data from Eurostat said Eurozone consumer prices declined in August, as initially estimated. Consumer prices fell 0.2% year-on-year in August, reversing a 0.4% rise in July. This was the first decline since May 2016. The rate came in line with the estimate released on September 1.

On a monthly basis, consumer prices decreased 0.4% as initially estimated in August. Core inflation that excludes volatile energy, food, alcohol and tobacco, eased to a record 0.4% from 1.2% in July. The core rate also matched preliminary estimate.

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