European stocks pared a decline of as much as 1.2% on Wednesday but remained in the red, as the FTSE 100 erased losses after the pound resumed its drop ahead of today’s key cabinet meeting, and as oil rebounded after a Reuters report OPEC+ may cut 1.4MM barrels of output, following the latest mixed data out of China…
… while Asian shares slumped and US equity futures slid in the red fading earlier gains.
Overall sentiment was negative, with stocks around the globe in the red, if not suffering major losses.
Europe’s Stoxx 600 Index was dragged lower by mining and energy shares following the latest round of disappointing Chinese retail sales data, as good news for the auto sector – following a Bloomberg report that the White House would hold off imposing auto tariffs for now – wasn’t enough tip the broad European market into the green.
European stocks were also pressured by the worst German GDP print since 2015 after Europe’s strongest economy contracted in the 3rd quarter as a result of collapsing auto production.
Not helping was continued political gridlock in Italy, whose cabinet defied Europe overnight and resubmitted its budget proposal, predicting a 2.4% budget deficit, a number that had previously been rejected by Brussels. European energy stocks were down 0.9%; they pared losses at one point as oil recovered after a OPEC’s President said the group and its allies will cut production, and Reuters reported up to 1.4MM barrels in production would be cut. West Texas crude attempted a rebound after posting its longest losing streak on record, however, the spike has been short-lived for now and at this pace, oil’s record 12-day decline appears set to continue.
The UK’s FTSE 100 was flat with the pound falling as much as 0.5% vs USD after a sharp jump on Tuesday, with the success of U.K. Prime Minister Theresa May’s Brexit deal still in question, given the need to win over her Cabinet members and later Parliament.
Energy producers also weighed in Australia, where equities slumped. Japanese stocks came off their highs of the day, while shares declined in Hong Kong, China, and South Korea. The Nikkei 225 (+0.2%) shrugged off a contraction to GDP data with the benchmark index kept afloat for most the session by JPY weakness and as automakers cheered reports the US was said to be planning to hold off on implementing auto tariffs for now. Elsewhere, Hang Seng (-0.5%) and Shanghai Comp. (-0.9%) were also downbeat as participants digested mostly uninspiring releases from China including softer than expected New Yuan Loans, Aggregate Financing, and Retail Sales, although Industrial Production and Fixed Assets Investment data topped estimates
In currencies, all eyes were on the pound, which swung between gains and losses as traders wait to see if Theresa May could persuade her cabinet to back her Brexit deal. The dollar reversed a decline during Asian hours, while the Norwegian krone hit its lowest level since June 2017 following a rout in oil prices. The euro dipped 0.2% to $1.1270 as euro-area economic growth slowed in the third quarter, held back by a contraction in Germany. The Swedish krona fell as inflation missed estimates for October, weakening the case for an interest rate hike as soon as next month.
