European shares fall as geopolitical fears grow
Europe’s stock markets have closed for the night, with the main indices losing ground.
The FTSE 100 and German DAX both fell by around 0.25%, while France’s CAC shed 0.5%.
Worries over Greece’s bailout haven’t faded, despite Alexis Tsipras hitting the phones in an attempt to reach a political solution with Angela Merkel and Emmanuel Macron.
Bild’s report that Greece might simply decline its next bailout loan, triggering a new debt repayment crisis this summer, has alarmed some traders – even though it has been robustly denied by Athens today. It’s a reminder that Greece’s debt crisis hasn’t gone away, with no sign of a serious debt relief deal.
Predictions of an early general election in Italy has also given investors some concerns.
Jasper Lawler of London Capital Group explains:
Talk that Italy will spice up Europe’s political landscape again with its own snap election is unsettling the idea that Europe is now free of populist risk in 2017. Former Italian Prime Minister Renzi has suggested Italy could hold simultaneous elections with Germany in September. Not to be left out, Greece may opt out of its next bailout if debt relief deal isn’t struck, adding to the potential for market disruption.
European assets need the three pillars of stronger economic data, higher political risk in the US and reduced political risk in Europe to outperform. Italy and Greece could are holding the sledgehammer that could knock down one of those three pillars.
On Wall Street, the Dow Jones is down 0.2% following the drop in US consumer confidence this month.
But Amazon’s burst over the $1,000/share mark has pushed the Nasdaq a little higher.
Chris Beauchamp of IG says the tech stock boom has further to run.
Momentum traders clearly still think that the likes of Facebook and Amazon can go higher, however, with the Nasdaq 100 having gained almost a fifth so far this year.
Amazon has surpassed the $1000 mark this afternoon, an event that would mark the top in the market perfectly, but one that probably won’t. There seems to be no shortage of investors willing to jump on board this bandwagon.
After an early wobble, the pound is higher tonight after a new poll gave Theresa May a 12-point lead ahead of next week’s election.
Traders are also digesting an interesting research note from JP Morgan, which suggests that a hung parliament could actually be good for sterling.
Strategist Paul Meggyesi argued that a centre-left coalition could be welcomed by the City, if it would aim for a softer Brexit.
As he put it:
In the post-referendum world, all political developments need to be viewed through a Brexit prism and an argument can be made that a hung parliament which delivered or held out the prospect of a softer-Brexit coalition of the left-of-centre parties (Labour/Lib Dems/SNP) might actually be sterling positive.”
And on that note, it’s time to wrap up. Thanks for reading and commenting. GW