European stocks reversed early gains to trade lower Thursday after a report that Chinese officials are doubting the possibility of a long-term trade agreement with the U.S.
The pan-European Stoxx 600 was down 0.3% during afternoon trade, with the China-exposed basic resources and automotive sectors each tumbling more than 1%. Oil and gas stocks shed 1.2%, meanwhile, after results from Royal Dutch Shell. Travel stocks were the strongest performers, adding 1.2% as most sectors slid into the red.
Chinese officials are doubting the potential for a comprehensive long-term trade agreement with the U.S. despite the two sides closing in on an initial “phase one” accord, Bloomberg News reported Thursday morning citing unnamed sources familiar with the matter. The news caused stocks to sharply reverse course.
However, President Donald Trump later said the U.S. and China would soon announce a new location where he and Chinese counterpart Xi Jinping would sign the preliminary deal. “President Xi and President Trump will do signing,” he said on Twitter.
Stocks on Wall Street traded lower on Thursday, as investors digested a fresh rate cut from the Federal Reserve and weighed the latest Sino-U.S. trade developments against better-than-expected corporate earnings.
The Federal Open Market Committee (FOMC) on Wednesday announced a third consecutive 25 basis point cut to interest rates in order to help sustain U.S. growth, but removed the key phrase from its statement pledging to “act as appropriate,” suggesting the central bank will halt monetary policy easing barring a significant downturn for the U.S. economy.
Back in Europe, Thursday kicked off with a landmark merger announcement from Italian-American carmaker Fiat Chrysler (FCA) and French rival PSA Peugeot Citroen, which creates the world’s fourth-largest automobile manufacturer.
FCA will pay its shareholders a 5.5 billion euro ($6.1 billion) special dividend and the two companies will join forces through a 50-50 share swap. The new company’s shares will be listed in New York, Paris and Milan. FCA shares jumped around 8.7% by the afternoon to lead the European blue chip index, while PSA slid to the bottom with a 12.2% plunge.
Meanwhile, U.K. Prime Minister Boris Johnson and main opposition leader Jeremy Corbyn begin their first full day of campaigning ahead of what promises to be a historic December election.
On the data front, euro zone GDP (gross domestic product) grew 0.2% in the third quarter, slightly better than forecast, while inflation grew 0.7% in October compared to 0.8% in September.
Earnings in focus
Royal Dutch Shell reported a 15% fall in third-quarter profits before the bell, missing analyst expectations. Shares of the Anglo-Dutch energy giant slipped 3.3% in afternoon trades.
French bank BNP Paribas beat profit expectations to post a net income of 1.9 billion euros ($2.1 billion) in the third quarter. Shares traded 0.5% lower.
Frontpage January 17, 2020