European stocks lower on geopolitics; Brexit speech from UK PM on the radar; L’Oreal up 4%

22 Sep

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European stocks were lower on Friday morning as geopolitical concerns took center stage.

The pan-European Stoxx 600 was 0.15 percent lower with most sectors moving into negative territory. Basic resources led the falls, down by more than 1 percent. The sector was impacted by the decision of Standard & Poor’s to downgrade China’s credit worthiness.

The steel producer Arcelormittal was among those at the bottom of the European benchmark, down by more than 1.8 percent. The firm is facing growing competition in its sector after Tata Steel and Thyssenkrupp announced a tentative agreement to merge their European businesses to create Europe’s second-largest producer – just behind Arcelormittal.

British engineer Smiths was the worst-performing stock, down by more than 4 percent, after reporting full-year pre-tax profits.

On the other hand, L’Oreal rose to the top of the European benchmark, up by 4 percent. This followed news that 94-year-old Liliane Bettencourt, who had the largest share of the company, passed away. This boosted traders’ opinion that Nestle will soon seek a higher stake in L’Oreal.

Overall, investors are taking cues from Asian markets where equities fell on concerns of another hydrogen bomb test. North Korean Foreign Minister Ri Yong Ho told reporters in New York overnight the country could perform another nuclear test in the Pacific Ocean of an “unprecedented scale.”

French GDP rose on consumer spending 

In terms of data, French second-quarter gross domestic product rose 0.5 percent from the previous quarter, on higher consumer spending. Corporate profit margins also increased slightly during the three-month period.

French flash PMIs (Purchasing Managers’ Index) also showed Friday that both services and manufacturing activities increased in August to their highest level since May 2011.

Meanwhile, IHS Markit figures for the euro zone showed private businesses growing stronger in the third quarter of this year, mainly due to the manufacturing sector. The positive data boosted confidence that the European Central Bank will announce monetary tightening next month.