European stocks closed lower Monday, as analysts said a surging euro squashed an early rally that had been sparked by an easing in recent trade-related tensions.
How markets are moving
The Stoxx Europe 600 index SXXP, -0.72% fell 0.7% to end at 363.19, closing at its lowest level since February 2017. The pan-European benchmark added to last week’s decline of 3.2%, its largest such retreat since the week ended March 2. It is now down 6.7% so far in 2018.
The euro EURUSD, +0.0161% traded at $1.2446, up from $1.2356 late Friday in New York. A stronger euro can whack the Stoxx 600 as many of its multinational companies generate their sales in foreign currencies.
In Frankfurt, the DAX 30 DAX, -0.83% dropped 0.8% to close at 11,787.26, and in Paris, the CAC 40 index PX1, -0.57% erased 0.6% to finish at 5,066.28. The FTSE 100 index UKX, -0.48% gave up 0.5% to end at 6,888.69 in London.
What’s driving markets
The euro jumped after German central bank President Jens Weidmann, part of the European Central Bank’s rate-setting committee, on Monday sounded hawkish about normalizing monetary policy. That builds on similar comments that he made last month and could add to talk that he’s too hawkish to become the next ECB president.
Meanwhile, fears about a possible global trade war have weighed on markets around the world this month, helped by news that U.S. President Donald Trump is pushing for tariffs on at least $50 billion of Chinese goods.
But such concerns appeared to abate on Monday, thanks to reports that Washington and Beijing are talking behind the scenes to avoid a trade war. U.S. Treasury Secretary Steven Mnuchin said Sunday that he’s “cautiously hopeful” that the world’s two biggest economies will reach an agreement to avoid tariffs. US. stocks ESM8, +0.40% were trading sharply higher.
On the data front, a fresh reading on France’s gross domestic product showed a year-over-year rise of 2.5%, matching expectations.
What strategists are saying
Weidmann “urged a faster end to the current stimulus measures, while also arguing that the prospect of a rate rise in 2019 remains a realistic possibility,” said Michael Hewson, chief market analyst at CMC Markets UK, in a note.
“This rise in the euro has taken all of the heat out of the rebound in European markets, sending stocks sharply lower,” Hewson added.
Earlier, analysts had cheered what proved to be a short-lived rally for European stocks.
“Traders are hopeful that the U.S. Treasury secretary, Steven Mnuchin, may help them to save the day,” said Naeem Aslam, chief market analyst at Think Markets UK, in a note.
“The French GDP is also helping in maintaining the positive momentum,” Aslam also said.
Stock movers
Dublin-listed shares in Smurfit Kappa Group PLC SKG, -4.12% SK3, -3.40% SMFKY, -1.71% fell 3.4% after the Ireland-based packaging-and-paper company rejected a revised bid from International Paper Co. IP, +4.43% that offered shareholders a total of 37.54 euros ($46.37) a share.
Roche Holding AG shares ROG, -0.74% dropped 0.7%, as they couldn’t maintain an advance that came after the Swiss pharmaceuticals heavyweight reported positive results for a lung-cancer treatment.
Shares in miner Fresnillo PLC FRES, +4.55% and Royal Bank of Scotland Group PLC RBS, +1.53% were notable gainers, rising after scoring upgrades to buy. Fresnillo closed 4.6% higher following an upgrade by Goldman Sachs analysts, while RBS jumped 1.5% after a bullish Deutsche Bank note.
