European stock markets edge higher, dollar drops

Donald Trump has hit out at Harley-Davidson's warning that it was planning to shift some production overseas

London (AFP) – European stock markets nudged higher on Wednesday, while the dollar dropped, as investors tracked global trade war developments.

Approaching the half-way stage in Europe, London’s benchmark FTSE 100 index was up 0.2 percent. 

In the eurozone, Frankfurt also won 0.2 percent and Paris gained 0.1 percent compared with Tuesday’s closing levels.

World equity markets had slumped Monday as trade war fears took a heavy toll on valuations, while attempts to claw back lost ground lacked conviction Tuesday. 

On oil markets Wednesday, both main crude contracts extended strong gains that had been triggered by the State Department warning US allies that they would be hit with sanctions if they did not halt Iran oil purchases by November 4.

Analysts said that while the announcement was not unexpected, the mere confirmation of the fact was enough to push investors into buying mode.

The commodity has enjoyed a healthy run since the weekend, when OPEC and Russia agreed to raise output by only a small amount.

Unrest in producer Libya was also providing support, with Brent crude adding more than two percent and WTI more than three percent Tuesday. 

Further gains Wednesday helped to lift share prices of oil majors.

Trade tensions continue to loom large meanwhile, with investors on edge awaiting the next developments.

Stephen Innes, head of Asia-Pacific trading at Oanda, said US President Donald Trump’s attack on Harley-Davidson indicated he is not ready to back down on his hardline protectionist ‘America First’ agenda.

Trump on Tuesday hit out at the motorbike maker after it said it was planning to shift some manufacturing overseas because of European Union tariffs put in place as retaliation for US duties.

He said the bikes should “never” be built outside the United States, and tweeted: “Harley must know that they won’t be able to sell back into US without paying a big tax!”

In a commentary, Innes said: “The only thing I can think of that is more iconic Americana than apple pie is Harley-Davidson.

“So, after the president’s recent Twitter tirade directed at the iconic motorcycle manufacturer, it cements the view that, friend or foe, no one is safe from the wrath of the US administration’s America First trade policy.”

He added that, while the US economy remains in rude health, which should provide equities support, “investors are caught between a hammer and anvil on escalating trade wars”.

On currency markets, the dollar fell across the board, including versus the haven yen.

The Chinese yuan also retreated and is coming under increasing pressure owing to concerns about the impact of a trade war on the world’s number two economy, which is also showing signs of weakness.

Markets are keeping an eye on US durable goods orders later Wednesday “with some interest here in whether the concerns being flagged by various Fed officials about trade worries leading to deferred investment and hiring decisions are showing up in orders”, said Ray Attrill, head of forex strategy at National Australia Bank.

– Key figures around 1030 GMT –

London – FTSE 100: UP 0.2 percent at 7,550.62 points 

Frankfurt – DAX 30: UP 0.2 percent at 12,257.25

Paris – CAC 40: UP 0.1 percent at 5,286.00

EURO STOXX 50: FLAT at 3,369.84

Tokyo – Nikkei 225: DOWN 0.3 percent at 22,271.77 (close)

Hong Kong – Hang Seng: DOWN 1.8 percent at 28,356.26 (close)

Shanghai – Composite: DOWN 1.1 percent at 2,813.18 (close)

New York – Dow Jones: UP 0.1 percent at 24,283.11 (close)

Euro/dollar: UP at $1.1641 from $1.1600 at 2100 GMT

Pound/dollar: UP at $1.3216 from $1.3200

Dollar/yen: DOWN at 109.86 yen from 110.08 yen

Oil – Brent Crude: UP 45 cents at $76.76 per barrel

Oil – West Texas Intermediate: UP 58 cents at $71.11