Germany Feels the Pinch, 21st Century Fox Walks Away from TimeWarner Bid
August 6, 2014 6:43 am
European stock markets fell on Wednesday amid heightened tensions between Ukraine and Russia, together with sustained weakness from Asian and US markets overnight.
Russia sharply increasing the number of troops and vehicles positioned on the eastern border of Ukraine in the past few days has accelerated worries of an invasion. The Stoxx Europe 600 Index slumped 0.8% while the FTSE100 Index in London dropped 0.5% and US stock futures traded lower. The losses were triggered after Polish Foreign Minister Radoslaw Sikorski said on local TV yesterday that Russia had restored its combat readiness on the Ukraine border. Such actions could be used to “exert pressure or to invade,” he said without giving any indication that an incursion was imminent. The EU agreed last week on its widest-ranging sanctions yet over Russia’s backing of rebels in eastern Ukraine.
Germany is feeling the pain of the increasing tension, with the Bundesbank citing geopolitical concern as contributing to a probable stagnation of the economy in the second quarter of this year. Indeed, German factory orders slid 3.2% in June from May, when they fell a revised 1.6%, well below market forecasts of a 1% increase and registering the steepest decline since September 2011. The DAX is currently trading down around 0.8%
In the US on Tuesday, the S&P 500 lost 1% to close at 1,920.21 in New York, while MSCI’s All-Country World Index fell 0.7% yesterday to the lowest level since May 23. The CBOE Vix index of equity volatility – Wall Street’s so-called “fear gauge” – rose 11.6%, placing it within sight of last week’s four-month high.
Sentiment was further hurt after deals worth more than $100bn were pulled off the table last night in the US, with analysts questioning the robustness of the recent M&A boom. Rupert Murdoch’s 21st Century Fox said it had withdrawn its $71bn offer to buy Time Warner, while Sprint, the US carrier controlled by Japanese billionaire Masayoshi Son, walked away from attempts to buy T-Mobile US after failing to win over regulators.
Economic data from the US also raised questions about the timing of interest rate hikes by the Federal Reserve on Tuesday. The fastest growth in US service industries since 2005 added to existing evidence of a self-sustaining recovery in the world’s largest economy. The Institute for Supply Management’s non-manufacturing index increased to 58.7, exceeding the highest estimate in a Bloomberg survey of economists, from the prior month’s 56.
Overnight in Asia, mainland China shares led the sharp sell-off across the region on mounting tensions in Ukraine. Japan’s Nikkei 225 lost 1%, in its fifth straight session of decline. Risk aversion built up overnight as tensions escalated in Ukraine. The tone across Asia was weaker, with Hong Kong’s Hang Seng Index declining 0.9%, while Sydney’s S&P/ASX 200 fell 0.4%.
In FX markets, the Japanese yen gained 0.1% to 102.5 against the dollar. The US dollar index, which measures the currency against a basket of rivals, rose 0.3% to 81.55 in the Asia session, its highest level since September as speculation grows that the Federal Reserve will soon be on a trajectory to raise interest rates.
In oil markets, West Texas Intermediate crude rose as much as 0.4% to to $97.72 a barrel after sliding 0.9% last session to the lowest settlement price since February. September Brent crude on London’s ICE Futures exchange rose $0.20 to $104.81 a barrel.
Gold prices on Wednesday broke through for their first positive showing this week as Ukraine fears cast a shadow over the equity markets. Gold for December delivery was up $6.60, or 0.5%, to $1,291.90 an ounce.
European stock markets fell on Wednesday amid heightened tensions between Ukraine and Russia, together with sustained weakness from Asian and US markets overnight.
Russia sharply increasing the number of troops and vehicles positioned on the eastern border of Ukraine in the past few days has accelerated worries of an invasion. The Stoxx Europe 600 Index slumped 0.8% while the FTSE100 Index in London dropped 0.5% and US stock futures traded lower. The losses were triggered after Polish Foreign Minister Radoslaw Sikorski said on local TV yesterday that Russia had restored its combat readiness on the Ukraine border. Such actions could be used to “exert pressure or to invade,” he said without giving any indication that an incursion was imminent. The EU agreed last week on its widest-ranging sanctions yet over Russia’s backing of rebels in eastern Ukraine.
Germany is feeling the pain of the increasing tension, with the Bundesbank citing geopolitical concern as contributing to a probable stagnation of the economy in the second quarter of this year. Indeed, German factory orders slid 3.2% in June from May, when they fell a revised 1.6%, well below market forecasts of a 1% increase and registering the steepest decline since September 2011. The DAX is currently trading down around 0.8%
In the US on Tuesday, the S&P 500 lost 1% to close at 1,920.21 in New York, while MSCI’s All-Country World Index fell 0.7% yesterday to the lowest level since May 23. The CBOE Vix index of equity volatility – Wall Street’s so-called “fear gauge” – rose 11.6%, placing it within sight of last week’s four-month high.
Sentiment was further hurt after deals worth more than $100bn were pulled off the table last night in the US, with analysts questioning the robustness of the recent M&A boom. Rupert Murdoch’s 21st Century Fox said it had withdrawn its $71bn offer to buy Time Warner, while Sprint, the US carrier controlled by Japanese billionaire Masayoshi Son, walked away from attempts to buy T-Mobile US after failing to win over regulators.
Economic data from the US also raised questions about the timing of interest rate hikes by the Federal Reserve on Tuesday. The fastest growth in US service industries since 2005 added to existing evidence of a self-sustaining recovery in the world’s largest economy. The Institute for Supply Management’s non-manufacturing index increased to 58.7, exceeding the highest estimate in a Bloomberg survey of economists, from the prior month’s 56.
Overnight in Asia, mainland China shares led the sharp sell-off across the region on mounting tensions in Ukraine. Japan’s Nikkei 225 lost 1%, in its fifth straight session of decline. Risk aversion built up overnight as tensions escalated in Ukraine. The tone across Asia was weaker, with Hong Kong’s Hang Seng Index declining 0.9%, while Sydney’s S&P/ASX 200 fell 0.4%.
In FX markets, the Japanese yen gained 0.1% to 102.5 against the dollar. The US dollar index, which measures the currency against a basket of rivals, rose 0.3% to 81.55 in the Asia session, its highest level since September as speculation grows that the Federal Reserve will soon be on a trajectory to raise interest rates.
In oil markets, West Texas Intermediate crude rose as much as 0.4% to to $97.72 a barrel after sliding 0.9% last session to the lowest settlement price since February. September Brent crude on London’s ICE Futures exchange rose $0.20 to $104.81 a barrel.
Gold prices on Wednesday broke through for their first positive showing this week as Ukraine fears cast a shadow over the equity markets. Gold for December delivery was up $6.60, or 0.5%, to $1,291.90 an ounce.
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