LONDON: European stock markets retreated on Monday following a largely downbeat performance by Asia, as Wall Street trod water.
“It was a directionless start to the new week for European markets as investors digested more hawkish Fed speak, a drop in the price of oil, improved French and German economic data and another mega-merger facing regulatory headwinds,” said Jasper Lawler at CMC Markets UK.
European stocks have pitched back and forth over the past week as investors have begun to take more seriously the probability the US Federal Reserve could raise interest rates in June.
Yoav Nizard at FXCM currency brokerage said the “market is indecisive, torn between a possible increase in rates by the Federal Reserve and expectations of new supportive measures from the ECB following increased deflationary risks in the eurozone”.
Moreover, “the drop in oil prices puts under pressure European stock exchanges which do not gain from a weak euro,” he added.
Monday’s big corporate news came from German drugs and chemicals giant Bayer, which said it had offered US$62 billion (€55 billion) for US agriculture group Monsanto as it seeks to create the world’s biggest supplier of seeds, pesticides and genetically-modified crops.
Bayer shares fell 5.7 per cent to €84.42 on Frankfurt’s DAX 30 index, which closed down 0.7 per cent. Monsanto shares climbed 4.9 per cent to US$106.52 in trading on Wall Street.
London’s benchmark FTSE 100 index eased 0.1 per cent after the government warned on Monday in a report that Britain could be plunged into a year-long recession and lose hundreds of thousands of jobs if it voted to leave the EU next month.
Meanwhile the Paris CAC 40 shed 0.7 per cent, with AXA also dropping 0.7 per cent after it became the first global insurer to cut ties with the tobacco industry, saying it would sell about €1.8 billion worth of investments in the sector
In the foreign exchange, the euro fell against the dollar, which in turn was down versus the yen.
Tokyo’s main stocks index closed down 0.5 per cent also after Japan published fresh data showing exports had faltered in April.
A stronger yen hurts Japanese exporters, a key driver of the world’s third largest economy, by making their products relatively more expensive overseas.
Japan had hoped its G7 counterparts – the United States, Britain, Germany, Italy, France and Canada – would at a weekend meeting give it some wiggle room to tame the unit as it threatens Japan Inc’s profits.
Japan last intervened in currency markets around November 2011, when it tried to stem the yen’s rise against the dollar to keep an economic recovery on track after the quake-tsunami disaster earlier that year.
But the G7 agreed on the “importance of all countries refraining from competitive devaluation”, while US Treasury Secretary Jacob Lew pressed Tokyo to uphold its earlier commitment not to interfere with exchange rates.
The meeting came ahead of a G7 summit in Japan later this week to be attended by US President Barack Obama and other leaders. G7 finance ministers on Saturday voiced concern about the sluggish global economy as they looked for a plan to stoke growth.