Eurozone stocks fell on Tuesday, weighed down by a strong euro as investors digested positive economic news, while London hit another all-time high on earnings-driven optimism.
Frankfurt and Paris stocks fell, but the euro rose against the dollar, with figures showing the euro zone economy emerged from recession with subdued inflation in the first quarter.
The euro then gave up its rise and began to fall.
Meanwhile, London markets soared to a new high of 8,199.95 points, and HSBC soared more than 4% on a raft of share buybacks, despite a drop in first-quarter profits and the resignation of its chief executive. However, the FTSE 100 index was unable to maintain its gains and closed the day.
Gross domestic product (GDP) in the euro zone, which fell into a shallow recession in the second half of last year, grew by 0.3% from the previous quarter in the first three months of 2024, faster than expected, according to official data. The annual inflation rate in April remained at 2.4% compared to the previous month.
Economists say the figures are unlikely to stop the European Central Bank from cutting interest rates in June.
The Federal Reserve is expected to keep interest rates on hold after Wednesday's meeting, but statements and comments from Chairman Jerome Powell will be closely watched for clues about the outlook.
– Weight of the euro –
“The ECB is still expected to cut rates in June, but what happens after that remains uncertain,” Fiona Cincotta, an analyst at City Index, told AFP.
“Accelerating growth and persistence of inflation could mean the ECB keeps interest rates high for an extended period of time, which is pushing the euro higher.
“However, higher borrowing costs over the long term are detrimental to companies and limit growth, which is why euro area stock exchanges are trending lower.”
Stocks on Wall Street opened lower after data showed that payroll costs for civilian workers rose more than expected by 1.2% in the first quarter of this year.
Patrick O'Hare, an analyst at Briefing.com, said the numbers fuel “concerns that general price inflation may be running above the Fed's 2% target for longer than expected.” He said it was likely to encourage interest rate cuts.
With inflation remaining above target and various indicators pointing to economic and labor market resilience, traders are betting on expectations for how much cuts the central bank will make in 2024. It's being lowered.
Meanwhile, Wall Street's major indexes fell further after U.S. consumer confidence fell to its lowest level since 2022 in April.
American consumers, the driving force behind the U.S. economy, appear to be less optimistic about the job market and more concerned about their future financial situation.
Asian markets were mostly higher on Tuesday, following gains on Wall Street overnight. On Monday, a public holiday in Japan, the Tokyo stock market caught up with gains in Asian markets, rising more than 1%.
The yen fell slightly, but maintained most of its gains from the previous day, which observers attributed to authorities' intervention after hitting a 34-year low of 160.17 yen to the dollar.
Traders are wary of further volatility in the yen after the Bank of Japan decided last week to hold off on further reversing its ultra-easy monetary policy, offering little guidance on when it might do so.
– Main figures around 1530 GMT –
New York – Dow: down 0.8% to 38,082.26 points
New York – S&P 500: down 0.6% to 5,083.22
New York-Nasdaq Composite: down 0.8% to 15,862.17
London – FTSE 100: down less than 0.1% to 8,144.13 (close)
Paris – CAC 40: down 1.0% to 7,984.93 (close price)
Frankfurt – DAX: 1.0% down to 17,932.17 (close price)
Euro STOXX 50: down 1.2% to 4,921.22 (closing price)
Tokyo – Nikkei Stock Average: 38,405.66 (closing price), up 1.2%
Hong Kong Hang Seng Index: 17,763.03 (closing price), up 0.1%
Shanghai – Overall: down 0.3% to 3,104.82 (closing price)
EUR/USD: down to $1.0694 from $1.0721 on Monday
USD/JPY: Increased from 156.35 yen to 157.44 yen
GBP/USD: down from $1.2563 to $1.2523
EUR/GBP: up from 85.33p to 85.37p
Brent crude oil: down 0.6% to $87.87 per barrel
West Texas Intermediate: down 0.7% to $82.07 per barrel
