European shares are lower on Friday. The FTSE 100 and German DAX are both trading within Thursday’s trading range, having just broken to multi-week highs.
The biggest drop in Chinese stocks since the summer rout, with the Shanghai Composite closing down 5.5% has weighed on European markets. Regulators have stepped up probes into short-sellers to include some of China’s biggest brokerage houses. The reason for the probes is likely to help stabilise the market by clamping down on leveraged trading and short-selling. The short-term reaction however has been destabilisation as investors run scared.
The reaction to the Chinese sell-off in European stock markets has been limited. With US stock markets open for just half a day, no major economic data before the weekend and a sliding oil price, a drop in Europe was probably going to happen irrespective of China.
The British pound fell against the euro and dollar after the second estimate of UK GDP for the third quarter fell in line with previous estimates to 0.5% and 2.3% year-over-year with foreign trade the biggest drag.
UK consumer confidence dropped to a six-month low according to GFK. Markets will look for confirmation of this from any initial signals from retailers over the success of their Black Friday sales.
The uncertainty in China following another weekly rise in US inventories has led to a decisive fall in Brent crude oil back below $45 per dollar. Oil has dragged the rest of the commodity complex including mining stocks lower with it. Shares of
Asian-focused bank Standard Chartered (L:STAN) is a top faller alongside other emerging market sensitive stocks such as Aberdeen Asset Management. Investors fear the bank could have struggled the most of all the UK banks in Bank of England stress tests, results of which are reported next Tuesday.
US stocks look set for a mixed start on Friday with thin volumes expected to keep activity limited as many market participants take the day off for an extended Thanksgiving holiday weekend.
USA pre-opening levels
S&P 500: 2 points higher at 2,090
Dow Jones: 7 points lower at 17,806
Nasdaq 100: 11 points higher at 4,683
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