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European stock markets advance, pound slumps

European stock markets edged higher on Tuesday, while the pound hit the lowest level versus the dollar in more than two years on Brexit deadlock.

The UK pound has continued to fall following the Brexit. PHOTO:AFP<br />

European stock markets edged higher on Tuesday, while the pound hit the lowest level versus the dollar in more than two years on Brexit deadlock.

Wall Street stocks, which had set new records as an expected Fed interest rate cut continued to fuel optimism, slipped at the opening bell as earnings season entered full swing.

The muted open came despite top banks JPMorgan Chase, Goldman Sachs, and Wells Fargo beating earnings expectations, as did consumer and medical goods firm Johnson & Johnson.

“The takeaway from the subdued response to the earnings news is that the good earnings news was already priced in,” said market analyst Patrick O’Hare at

He pointed to a drop in JP Morgan’s shares in pre-market trading as the bank cut its forecast for net interest income — the difference between the interest rates it charges consumers for loans and the interest it must pay for deposits.

“The post-report weakness in an industry behemoth like JPMorgan Chase has taken some wind out of the market’s sails,” said O’Hare.

Corporate profits are expected to be broadly lower owing largely to a global slowdown and trade war between the US and China.

A Chinese official on Tuesday rejected claims from US President Donald Trump that Beijing is being forced to make a trade deal because of its slowing economy, as the two sides prepare for more talks.

US Treasury Secretary Steven Mnuchin on Monday said that top American and Chinese trade negotiators were due to speak by telephone in the coming days, but no face-to-face talks have been scheduled yet.

Concerned about complacency
Dealers are also keeping an eye on Beijing to see if it unveils any economic stimulus as data on Monday showed second-quarter growth at its weakest pace for almost three decades.

“We are concerned about complacency as investors seem to believe the Fed will save the day, the US-China trade dispute will be resolved relatively soon and massive China stimulus will boost global growth,” said Bob Doll at Nuveen Asset Management.

“We think this combination is a tall order. As a result, market risks lean more to the downside.”

Asian equities closed mixed, with investors taking a breather after a recent rally.

In London, shares in Burberry shot up 12 percent after the British luxury fashion house reported a rise in first-quarter sales on strong growth in China and thanks to a Brexit-fuelled weak pound enticing Asian tourists to snap up its goods during trips to the UK.

“First quarter sales are better than expected thanks to positive customer response to a new collection by chief designer Riccardo Tisci, as well as decent business in Asia,” noted Russ Mould, investment director at AJ Bell.

The pound meanwhile continued to suffer on Tuesday despite data confirming low UK unemployment.

Sterling slumped to $1.2408, the lowest level since April 2017.

The euro climbed to 90.42 pence, the European single currency’s highest level versus sterling since January.

“Unfortunately, traders are finding it hard to look past no-deal risks or at the very least a delay and hard Brexit, which continues to weigh on the currency,” said Craig Erlam, senior market analyst at Oanda trading group.

Official data Tuesday showed Britain’s unemployment rate at 3.8 percent in April, the lowest level since 1974.

– Key figures around 1330 GMT –
London – FTSE 100: UP 0.4 percent at 7,561.72 points

Frankfurt – DAX 30: UP 0.2 percent at 12,413.07

Paris – CAC 40: UP 0.5 percent at 5,605.45

EURO STOXX 50: UP 0.4 percent at 3,516.78

New York – Dow: DOWN less than 0.1 percent at 27,348.78

Tokyo – Nikkei 225: DOWN 0.7 percent at 21,535.25 (close)

Hong Kong – Hang Seng: UP 0.2 percent at 28,619.62 (close)

Shanghai – Composite: DOWN 0.2 percent at 2,937.62 (close)

Pound/dollar: DOWN at $1.2419 from $1.2516 at 2100 GMT

Euro/pound: UP at 90.34 pence from 89.95 pence

Euro/dollar: DOWN at $1.1219 from $1.1258

Dollar/yen: UP at 108.15 yen from 107.87 yen

Brent North Sea crude: UP six cents at $66.54 per barrel

West Texas Intermediate: UP six cents at $59.64 per barrel

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