Escalating Us-China Trade Dispute Causes Mixed Closing of European Stocks

Business February 20, 2019

Effect of Trade Tension

The trading session on Thursday closed with European stocks closing with a mixed performance. The mixed performance was reportedly due to the escalating US-China trade dispute coupled with the reporting of corporate earnings.

Stoxx Europe 600 reportedly closed 0.1% higher and the individual sectors on the index had varying performances. For instance, the oil and gas sector closed 0.8% lower owing to the aggravating geopolitical tensions. On the other hand, the retail stocks surged during the afternoon trading and closed 1.3% higher.

European stocks’ mixed performance was reportedly due to the escalating US-China trade disputes coupled with the reporting of corporate earnings.

IG data showed that Britain’s FTSE rose by 34 points and was at 7,766. France’s CAC 40 remained flat, German DAX went two points lower and was at 12,623 while Italian’s FTSE MIB plunged lower by 15 points. Most of Asian stocks traded higher, but the gains were restricted all through the whole trading session as a result of the current trade tensions globally.

Individual Stock Performance

For the individual stocks’ performance, Cineworld ranked highest on the European benchmark the close of trading on Thursday as it closed 10.8% higher. The company recorded a 0.8% surge in its revenue for the half of the year as its movies including “Avengers” and “Black Panther” reportedly led to a surge in its U.S. sales.

Adidas also released its earnings reports and went on to outperform market expectations. Stocks of the sportswear company reportedly closed 9.4% higher. That came after the company published a beyond-expectation net profit for its second quarter. Its performance was surprising given the impairment charge levied on its Reebok brand. Also, Pandora shares climbed higher in the afternoon trading and closed 3.7% higher. The chief executive officer of the jewelry company officially announced that he was exiting the office and the news from the day before had the company sending out profit warnings.

On the flip side of the Stoxx index, G4S closed 7.8% lower after it reported a plunge in its profits for the first half of the year. G4S, considered to be the largest security agency in the world, had its recent figures affected by weaker revenues from Middle East as well as costs of restructuring. Tui stocks also closed lower by 2.5% to pair back on the losses it recorded earlier in the trading session. The leading travel company stated that it was still very much on its path to recording a 10% increase in profit before the end of 2018.

Stocks in the U.S. had a slightly different opening Thursday given that the S&P 500 remained closely on the path of soaring to an historic high. Dow Jones Industrial Average surged by a point with DowDuPont outperforming others. The Nasdaq Composite surged by 0.2% given that Amazon shares got to a historic high and Apple surged with almost 1%. The S&P 500 had a flat trading and the materials stocks outperformed other stocks

Stocks in the U.S. had a slightly different opening Thursday given that the S&P 500 remained closely in the range of soaring to an historic high.

Influencing Factors

Russia will be at the receiving end of the U.S. sanctions on the basis of the alleged involvement of Kremlin in poisoning of Sergei Skripal, an ex-spy who lived in Britain till the time of his death. A spokesperson of the State Department noted that the sanctions will take effect anytime from August 22.

Also in the news is China’s imposition of additional 25% tariffs on U.S. steel and fuel imports worth $16 billion. The fresh imposition announced on Wednesday is a retaliatory measure against the threatened additional tariffs of the U.S. on Chinese goods which would reportedly go into effect starting August 23.

Inflation data for Chinese factory pointed to a slowing price growth for last month, even though there were increases in consumer price. On Thursday morning, the British pound continued to be under pressure against the U.S. dollar. Worries about U.K exiting the European Union remained till Thursday and fears that a no-deal Brexit will be reached. Sources claim that Liam Fox, the UK Trade Minister, commented over the past weekend that the likelihood of a no-deal Brexit had changed from 50-50 to 60-40 and that further increased worries.