The new offensive commercial US rekindles risk aversion


by Marc Angrand

PARIS (Reuters) – The european stock markets had ended sharply down on Wednesday, sealed once more by the threat of increased taxation of the chinese products by the United States, the risk aversion that had put an end to the rebound of the last few days and threatening to disrupt the period of publications of results.

In Paris, the CAC 40 closed with a decrease of 1.48% (80,43 points), the more marked since the 25th of June, 5.353,93 points. In London, the FTSE 100 lost 1.3%, and in Frankfurt, the Dax was down by 1.53%.

The index EuroStoxx 50 has sold 1.47 per cent, the FTSEurofirst 300 1.27 per cent and the Stoxx 600 1,26%, ending a sequence of six sessions of gains.

At the time of the close in Europe, Wall Street was changing it also in the red, the Dow Jones abandoning 0.75% and the Nasdaq Composite of 0.57%.

The decline had started in the asian markets after the publication by the american administration a list of chinese products representing $ 200 billion (€171 billion) of u.s. imports that Washington may be taxed at 10% in two months in the absence of agreement with China.

As in previous episodes of the iron arms trade between the two leading economies of the world, China has insured does not want a trade war opened, but be ready to retaliate if necessary.

The index CSI 300 of the main caps, the chinese ended the day down 1.74%, and the yuan has lost over 0.6% against the us dollar on the market, “offshore”, to the lowest since 11 months.

“The problem with China is that it is unable to match the United States from the point of view of imports to which apply the customs duties, since the United States imports more goods and services to chinese that China is not in any of the United States,” notes Tom Milson, managing director of GWM Investment Management.

“China will therefore need to be imaginative in its response using its currency to strengthen the u.s. dollar, and therefore raise the cost of credit in the United States and make chinese products less expensive.”

The return of the threat of trade has also weighed on the prices of raw materials: the copper, the lowest for nearly a year, has dropped 3.01%, that of nickel was 0.99%.


Side actions in Europe, the Stoxx basic resources has logically suffered the decline most marked (-3,30%). Among the other sectors sensitive to trade tensions, the automotive sector has yielded 1.8% and high tech 1,49%.

The compartment for the oil and gas (-2,30%) has suffered from the fall in crude prices, despite the announcement of a decrease of 13 million barrels of inventory in the United States last week, the highest since almost two years.

The light crude (West Texas Intermediate, WTI) has only briefly cut its losses and yield of 2.37% 72,35 dollars.

The oil had previously suffered from a part of the escalation of tension on international trade, on the other hand the announcement by Libya to the reopening of four oil terminals which the closure had divided more than half the daily production of the country.

The renewed risk aversion linked to the trade also has the effect a movement of retreat on the government borrowing, therefore a decrease in returns: one of the obligations of the u.s. Treasury ten-year is back under 2,86% compared to 2,875% higher on Tuesday. However, it has slightly reduced its decline after the monthly figures exceed the expectations of output prices in the United States.

The government bond yields of the euro area and the single currency also gained ground, according to the information of Reuters on the divisions within the european central Bank (ECB) on the timing of the first rate hike expected in 2019.

The euro, having fallen to the mid-session under the threshold of 1.17 to the dollar, went ahead and dealt with around 1,1721 at the time of the closing of the european markets after a peak at 1,1758.

The yield on the German Bund at ten years is then displayed to 0.31%, after a lower 0,292% in the morning.

At the same time, the canadian dollar appreciated after the raising of the intervention rate of the Bank of Canada. This last was said to consider a further tightening of its monetary policy, while referring to “uncertainty” related to the trade tensions.


Values, Carrefour (PA:CARR), red lantern of the CAC 40, has disposed of 4,87%. Barclays (LON:BARC), neutral on value, has lowered its price target by saying expect sales on a comparable basis and margins for the group have fallen again in the first half. The distributor must publish its half-year results on July 26.

In London, Burberry (LON:BRBY) has lost 4.05 per cent. If its quarterly sales are in line with expectations, the luxury group wanted to confirm its forecasts, which promoted profit-taking after a gain of nearly 40% since the low of early February.

Burberry has brought in its wake several other values of the area: Kering (PA:PRTP) has yielded 3.81 per cent, LVMH (PA:LVMH) of 2.46%, and Hermes (PA:HRMS) of 2.75%.

The decrease in the most spectacular of the day, however, is for the pharmaceutical group british Indivior, which has lost 29,52% after a warning on its results.

The increase in Paris, Spie (PA:SPIE) (+5.12%) and Lagardère (+2,48%), the best two performance of the SBF 120 index, have benefited from recommendations to purchase, Kepler Cheuvreux for the first, and Goldman Sachs (NYSE:GS) for the second.

(Edited by Wilfrid Exbrayat)

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