EUROPE MARKETS: Brexit, China Trade Weigh On Europe Markets

By Dave Morris

Trade saber-rattling and a dollop of Brexit anxiety pushed European markets down in early trading Friday.

How did markets perform?

The Stoxx 600 was down 0.6% to 380.7. On Thursday, it rose 1.3%.

The U.K.'s FTSE 100 declined 0.5% to 7,318.4. That nearly erased Thursday's gain of 0.8%.

The pound, which swooned 0.6% Thursday on the latest Brexit news, dipped an additional 0.1% Friday to $1.2778.

In Germany, the DAX (DAX) shrank 0.8% to 12,214.8. It jumped 1.7% Thursday.

France's CAC 40 moved down 0.5% to 40 5,418.5, after swelling 1.4% Thursday.

Italy's FTSE MIB slipped 0.4% to 21,076, on the heels of Thursday's 1.4% increase.

What's moving the markets?

The China-U.S. trading narrative has dominated market commentary this week, largely in the absence of other major developments--or for that matter, developments in the negotiations themselves, which are paused. Instead, Chinese media have taken a hostile line in contrast with the sunny platitudes issued by U.S. officials. Ministry of Commerce spokesperson Gao Feng described the U.S.' recent tariff hike as "bullying behavior" (http://www.xinhuanet.com/english/2019-05/16/c_138064271_2.htm) and said China had policy tools to wait out a protracted standoff.

Speaking of protracted standoffs, Brexit appeared ready to heat up again on the back of three related events. Talks between the Conservatives and Labour are likely to break down Friday without a deal, with neither party having conceded significant ground. Instead, U.K. Prime Minister Theresa May pinned her hopes of her premiership surviving the summer on a final vote on her unpopular Brexit deal, amid reports that she would have to stand down if the bill were defeated. That, and hard-core Brexiteer Boris Johnson's admission that he would "of course" stand for the Conservative leadership, were taken by currency markets to make a no-deal Brexit seem increasingly likely--sending the pound sharply lower.

Which stocks are active?

EasyJet PLC (EZJ.LN) shares climbed 4.5% even as it reported a significant loss in its earnings for the first half of the year. The U.K. budget airline reported a pretax loss of GBP272 million, far worse than the GBP68 million reported in fiscal 2018. The market, however, was unfazed.

Russ Mould, investment director at AJ Bell, said: "This is reward for the tight control of costs which means despite lower revenue, full year profit guidance is unchanged."

Metro Bank PLC (MTRO.LN) jumped another 19.5% Friday after rising nearly 15% Thursday. The upstart lender, which has been struggling after miscalculating its regulatory requirements, successfully raised GBP375 million in fresh capital, more than it had originally targeted. The move could help stabilize the bank's shares, which have lost nearly 81% in the past 12 months.

Just Eat PLC (JE.LN) was down 7.1% on reports that Amazon would lead an investment round in Deliveroo (http://www.marketwatch.com/story/amazon-to-lead-575-million-investment-in-uks-deliveroo-2019-05-17), a rival restaurant-food delivery service. Just Eat is also facing an activist investor campaign urging it to merge with one of its peers.

(END) Dow Jones Newswires

May 17, 2019 05:44 ET (09:44 GMT)

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