US-China tensions hit European cyclical stocks

A photographer takes pictures of the German share price index (DAX) board at the stock exchange in Frankfurt, Germany, February March 9, 2020. — Reuters pic
A photographer takes pictures of the German share price index (DAX) board at the stock exchange in Frankfurt, Germany, February March 9, 2020. — Reuters pic

LONDON, Aug 7 — European shares were trading largely flat today after their Asian peers were hit by an escalation in US-China tensions, but an upbeat earnings season and hopes of more stimulus kept most regional indexes on course for weekly gains.

The pan-European STOXX 600 index opened lower before trading flat, with growth-exposed cyclical sectors like banks, automakers and oil and gas firms handing back some of this week’s steady gains.

US President Donald Trump yesterday moved to ban US transactions with popular Chinese apps, Tencent’s WeChat and ByteDance’s Tiktok, calling them “significant threats.”

That came as Washington and Beijing officials were set to review the implementation of the Phase 1 trade deal next week, sources told Reuters.

The news knocked 1 per cent off Asia-Pacific shares, while Amsterdam-listed Prosus, with its biggest investment in Tencent, fell 4.7 per cent.

In a note to clients, Citi analysts said they viewed Trump’s moves as less “significant (than) the consulate closure two weeks back (and) continue to expect China to stay restrained in terms of a retaliation.”

Markets, however, appeared to be in a holding pattern ahead of US jobs data, due for release later in the day, while also awaiting a new stimulus package to prop up the world’s largest economy.

Despite concerns over rising coronavirus cases in parts of Europe and uncertainty about a US recovery, the STOXX 600 was on course for a weekly gain as more companies exceeded analysts’ beaten-down expectations for second-quarter earnings and economic data continued to improve in Europe.

Deutsche Telekom, which owns 43 per cent of T-Mobile , rose 2.6 per cent after the US firm added more monthly phone subscribers than expected in the second quarter.

The broader telecoms index rose one per cent.

UK’s Hikma Pharmaceuticals jumped 10.4 per cent after saying it has started manufacturing remdesivir, an approved treatment for Covid-19 from US-based Gilead and it raised its annual sales outlook for two of its biggest divisions.

Aero-engineer Rolls-Royce Holdings dropped 3.2 per cent after a media report that activist shareholder ValueAct Capital Management sold its stake in the company. — Reuters

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