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Europe: Stocks mixed in light trading; euro erases losses


[LONDON] The euro erased losses on the chance of an earlier rate increase by the European Central Bank after a report that some policy makers were uneasy about expectations for a hike as late as December 2019.

European stocks ended fractionally higher while futures for the S&P 500 advanced in a lacklustre trading session overshadowed by the US holiday. The mood in Asia was more downbeat, and shares slipped even as the yuan extended a rebound. The Brazilian real weakened for a second day as the Ibovespa rose, led by Petroleo Brasileiro SA.

Telecom companies were the biggest winners on the Stoxx Europe 600 Index, though declines in technology shares helped offset the move. Trading volumes were more than 40 per cent below the 30-day average. Asian shares notched further losses even as China's currency rose for a second day, though it pared some gains after a Reuters report that the central bank is comfortable with a weaker yuan. The yen nudged higher and the euro slipped, while the pound rose on data showing the UK's services sector grew at the fastest pace in eight months in June. West Texas Intermediate oil gave up earlier gains and most industrial metals declined.

While the People's Bank of China yesterday gave assurances that the yuan won't be weaponised, governmental trade restrictions and market intervention remain key themes. The latest tit-for-tat moves include a Chinese court temporarily banning chip sales by an American tech firm, while tariffs on goods flowing the other way come into effect on Friday. With US markets shuttered for Independence Day, the focus is shifting to a busy end to the week, when minutes from the last Federal Reserve meeting and jobs numbers are due.

The move in the yuan set a gauge of developing market currencies on course for the first back-to-back gains in a month, while the MSCI Emerging Market Index of stocks headed for a third consecutive decline.

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