The growing tension between the US and China put pressure on European stock markets today. Most EU indices are declining, not paying attention to the positive side of the opening economies of many countries after the coronavirus pandemic.
Market participants today are more engaged in the conflict between Washington and Beijing, which flared up against the backdrop of the adoption of a new bill designed to preserve and protect the national security of Hong Kong.
Today, US President Donald Trump is expected to make an announcement on further actions in relation to China, which will act as a response to the plans of the Chinese authorities. China’s attempt to expand its control over Hong Kong was met with extremely negative results by colleagues from America, after which there was a threat that some of the duties on Chinese goods, which were abolished earlier, could return again.
Nevertheless, China did not refuse to create the law, which caused an even greater surge of negative emotions. At present, not only the United States but also Australia, Canada, and the United Kingdom express extreme concern about the planned release of the Hong Kong National Security Act.
Germany’s DAX index fell by 1.5% in the morning, France’s CAC index fell by 1.3%. The lowest is the FTSE UK which fell by 1%. Italy’s FTSE MIB Index fell 0.78%, while Spain’s IBEX 35 Index lost 1.06%.
The statistics, also received this morning, reflected the best dynamics of the European economy compared to preliminary assumptions of analysts. Thus, the level of German retail sales decreased by 5.3% compared with the previous month. Earlier, retail sales were expected to decrease by as much as 12%, but this did not happen.
The economy of another European country, France, has also slowed down. The country’s GDP fell by 5.3% compared with the previous three months, while experts expected to see a fall of at least 5.8%. However, this positive cannot be considered sufficient to support the stock market, if only because the French economy entered the recession for the first time in more than ten years.
Negative emotions were added by the level of consumer spending in France, which last month showed a record drop for the entire period of statistics. The decrease amounted to as much as 20.2% against the data put forward in the forecasts of 14.7%.
The general index of enterprises in the European Region Stoxx Europe 600 in the morning became lower by 1.13% and reached the mark of 351.45 points.
The corporate sector is under the same pressure. Thus, the value of Renault SA securities fell by 3.2% immediately after it became known about the company’s intentions to carry out a large-scale reduction of employees in all of its enterprises in the world. This measure acts as the only possible one in order to reduce the company’s own expenses.
Shares of another automaker from Germany – Volkswagen AG – are also falling. Today, they have already fallen by 2.6% amid news of the repurchase of 50% of the securities of the parent company.
The shares of the UK construction company SIG Plc, on the contrary, show positive dynamics and grow today by 1.1%, despite the published information about the tax loss for the previous reporting year.
Thus, it turns out that the last business day this week reflected an insignificant, but still negative external background, which could have an impact on the European stock market and made it rollback.