Stock markets’ rally peters out, sterling pressured

24/02/2016 07:09 AST

World stock markets retreated on Tuesday following a rally that kicked off the week as concern about “tepid” global growth returned to the fore and the mining sector took another hit.

Fears over Britain’s future in the European Union heaped further pressure on sterling after it fell to near seven-year lows Monday, while the euro fell in response to poorly-received German data.

“Equity markets are in the red...but not quite down and out,” said Mike van Dulken, head of research at Accendo Markets. “A pullback by oil and industrial commodities from key technical levels is sapping risk appetite, as is another miner showing us how tough things are.”

Global mining giant BHP Billiton posted a net loss for the six months to December 31 of $5.67 billion (5.15 billion euros) and slashed dividends as plunging commodity prices hammered its bottom line and the company warned of a prolonged period of volatility.

In mid afternoon deals, BHP shares were more than four per cent lower on London’s benchmark FTSE 100 index, which was slightly down overall.

Similarly the eurozone’s main indices in Germany and France tipped moderately lower - Frankfurt’s DAX 30 index fell 0.58 per cent while the Paris CAC 40 slipped 0.40 per cent compared with Monday’s close. Shares on Wall Street also flagged at opening.

International Monetary Fund chief Christine Lagarde told a forum in Dubai that the world economy was going through a “tepid” recovery, although growth in advanced economies should be higher. German business confidence fell for the third consecutive month in February, with manufacturers reporting the biggest drop in confidence since November 2008, the Ifo economic institute said.

The institute’s closely-watched business climate index slumped to a level not seen since January 2015, falling to 105.7 points in February from 107.3 points in the previous month, Ifo said in a statement. Analysts said the reading showed that Germany’s powerful export industry was starting to wake up to global concerns roiling international markets.

ING’s Carsten Brzeski said the data showed that “global events have finally reached German companies’ boardrooms”. “Expectations have taken another sharp hit from recent market turmoil, the adverse impact of low oil prices and renewed concerns about a slowing of the Chinese economy,” he said. Asia’s share rally stalled Tuesday, with markets battling a fresh fall in the price of oil and renewed fears for the Chinese economy.

In Tokyo, Japanese stocks fell as a stronger yen hit exporters. Almost 200 bosses of top British companies urged voters to keep Britain in the EU, warning that an exit from the bloc would threaten jobs.

The Gulf Today