European stocks were lower on Thursday, continuing this week’s pattern of one day up, one day down. The Euro Stoxx 50 fell below yesterday’s low to 3420. The last three days have seen a feeble attempt to rebound off one-month lows for UK stocks. The FTSE 100 is lower again on Thursday, nearing its lowest since October 10 at 6251.
Stocks opened initially lower following disappointing Chinese credit growth figures that came in below half of expectations. The credit growth slowdown is in spite of numerous policy measures intended specifically to boost it and spur stronger growth in the economy. The risk is that Chinese authorities reassess the effectiveness of the tools in their kit and steer away from the so far ineffective rate cuts towards currency devaluation which should help exports.
There was some semblance of a move to risk-on when ECB president Mario Draghi sent the euro to three month lows versus the pound during a dovish testimony at the European parliament. Really, Mr Draghi didn’t say anything that hasn’t been said already and stocks rolled back over. There has been unconfirmed talk of the ECB buying municipal debt including bonds from cities like Paris and regions like Bavaria. Mr Draghi’s failure to mention municipal debt purchases probably reflects the lack of time to draft out such a new policy measure before December. The net effect is markets have nothing new to work with.
Southern European equities including the Spanish IBEX fell as a general strike in Greece, indorsed by the government, coupled with the likely election of a socialist government in Portugal weighed on hopes that nations in the region can follow-through on tough reforms and austerity policies.
Rolls Royce (L:RR) was the biggest drag on the FTSE 100, down a record record-breaking 20% after another profit warning. Rolls Royce is caught in a cross-fire of two big market sensitivities; auto-makers after the VW scandal and luxury goods given the slowdown in China.
US stocks look set for a lower open ahead of a speech from Fed Chair Janet Yellen and quarterly earnings reports from Cisco, Viacom, Kohls and Nordstrom.
USA pre-opening levels
S&P 500: 4 points lower at 2,071
Dow Jones: 33 points lower at 17,669
Nasdaq 100: 4 points lower at 4,632
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