Banks decline as worries over U.S. tax reform crop up again
Stocks across Europe ended mostly lower on Friday, as retail and bank shares slumped into negative territory, and yanked the regional benchmark lower for a third straight session.
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How markets are moving: The Stoxx Europe 600 index dropped 0.2% to 388.19, deepening its weekly loss to 0.3%. Last week, it rose 1.4%.
On national bourses, (http://www.marketwatch.com/story/european-stocks-step-back-from-highest-in-5-weeks-but-retailers-gain-ground-2017-12-13)France's CAC 40 fell 0.2% to 5,349.30, while Germany's DAX 30 index advanced 0.3% to 13,103.56.
In London, the FTSE 100 rose 0.6% to 7,490.57 (http://www.marketwatch.com/story/ftse-100-struggles-for-3rd-day-as-banks-fall-but-on-course-for-weekly-advance-2017-12-15), as the pound tumbled.
Sterling tumbled to $1.3313, down from $1.3430 late Thursday in New York. A weaker sterling tends to give the FTSE 100 a boost as about 75% of revenues for the index's components is made overseas.
The euro traded at $1.1768, down from $1.1778 late Thursday.
Check out: What European stock-market sector looks good in 2018? (http://www.marketwatch.com/story/what-stock-market-sector-looks-good-in-2018-think-planes-trains-and-automobiles-2017-12-11)
What's moving markets: Worries surrounding Republican-led efforts in Washington to cut taxes cropped up again, sending U.S.-listed bank shares lower Thursday, and European bank stocks followed that lead Friday. Expectations for tax cuts and an overhaul in U.S. tax polices have at times boosted bank stocks world-wide throughout the past year.
Sen. Marco Rubio on Thursday told Senate leaders he'll vote against the tax bill unless it includes a larger expansion of the child tax credit (However, late-breaking reports indicated that lawmakers made sufficient strides on that point to win Rubio's vote). Still, several Republican senators have expressed doubts about the tax overhaul ahead of an expected vote on the final bill next week, according to The Wall Street Journal. (https://www.wsj.com/articles/house-senate-republicans-reach-deal-on-final-tax-bill-1513185360)
In Brussels, EU leaders determined that sufficient progress in Brexit negotiations has been made in recent months to move talks on to the second phase that includes trade and the transition period.
While this is seen as a positive development, European Commission president Jean-Claude Juncker warned that the next round of Brexit talks will be "significantly harder" than the first round.
(https://www.wsj.com/articles/house-senate-republicans-reach-deal-on-final-tax-bill-1513185360)What strategists are saying: "Markets started out on the back foot and drifted for most of the afternoon. The dip-buyers that have stepped in throughout the year failed to materialize, fearing the ticking clock on U.S. tax reform," said Jasper Lawler, head of research at London Capital Group, in a note.
"Until tax reform is signed off, end of year profit-taking and fear about a U.S. government shutdown could impair the march to new records in stock markets. We suspect tax deal holdouts including former Presidential hopeful Marco Rubio will probably give way eventually to allow a last minute deal and a nice Santa rally," he added.
Rebecca O'Keeffe, head of investment at Interactive Investor, also weighed in on the tax issue.
"The Republicans can afford a draw in the Senate, as Vice President Mike Pence casts the deciding vote, but this deal is a key risk for markets, and its defeat, while unlikely, could cause carnage," she said.
Meanwhile Goldman Sachs addressed what's next in Brexit talks.
"The main obstacle to [a Brexit] transition deal lies within British domestic politics, rather than in negotiations between the U.K. and EU-27. As Brexit negotiations turn to the more complex task of defining a new post-Brexit UK/EU relationship in the coming year, risks to a final deal are likely to intensify rather than diminish," said Huw Pill, chief European economist at Goldman Sachs, in a note released Friday.
Stock movers: H&M shares (HM-B.SK) sank 13%--the most since 2001--after the apparel retailer said fourth-quarter sales fell to 50.39 billion Swedish kronor ($6 billion), hurt by declining visits by customers to its stores (http://www.marketwatch.com/story/hm-sales-down-as-store-visits-decline-2017-12-15) and sluggishness in embracing e-commerce. Analysts polled by FactSet had expected 54.07 billion kronor in sales.
Salvatore Ferragamo SpA (SFER.MI) dropped 6.3% after the high-end fashion retailer said it was unable to confirm midterm targets it presented earlier this year. The Stoxx Europe 600 Retail Index dropped 1.9%.
Ryanair Holdings PLC shares lost 9% after Europe's biggest budget airline said it would recognize pilot unions (http://www.marketwatch.com/story/ryanair-backpedals-on-unions-calls-for-no-strike-2017-12-15). The company faced the threat of strikes before Christmas.
Among bank stocks, shares of Société Générale SA (GLE.FR) lost 1.9% and HSBC Holdings PLC (HSBA.LN)(HSBA.LN) fell 0.7%. The Stoxx Europe 600 Bank Index dropped 0.6%.
Tele2 AB (TEL2-B.SK) rose 1.7% after Deutsche Telekom AG (DTEGY) said it's reached an agreement with Tele2 under which T-Mobile Netherlands will acquire Tele2's Dutch business for 190 million euros (http://www.marketwatch.com/story/deutsche-telekom-to-buy-tele2-abs-dutch-business-2017-12-15) ($223.8 million) in cash and a stake of 25% in the combined company. Deutsche Telekom shares ended 0.7% lower.
Economic data: The eurozone's trade surplus narrowed sharply (http://www.marketwatch.com/story/eurozone-trade-surplus-narrows-as-exports-fall-2017-12-15) in October as exports fell. Exports, adjusted for seasonal patterns, fell by 2.4% from September, while imports were up 0.6%, the European Union's statistics agency.
(END) Dow Jones Newswires
December 15, 2017 12:36 ET (17:36 GMT)