European stocks on Friday closed lower, ending three weeks of gains as investors booked profits in technology and commodity-linked shares due to concerns over rising inflation and interest rates on the back of a jump in bond yields.
The benchmark STOXX 600 fell 1.64 percent to 404.99 and shed 2.38 percent for the week — its first weekly loss this month — with technology stocks losing the most as they continued to retreat from 20-year highs.
On the day, resource stocks were the softest-performing European sectors, tumbling 4.2 percent from a near 10-year high in their worst session in five months.
“Equity markets across the US and Europe are quite expensive now, and with bond yields constantly rising, the fixed income market is proving to be more attractive than the riskier equity market,” Societe Generale SA strategist Roland Kaloyan said. “Investors are actually looking at the pace at which yields drop and the current speed is quite concerning for equity markets.”
US and eurozone bond yields retreated slightly, but stayed close to highs hit this week as investors positioned for higher inflation this year. Yields were also set for large monthly gains.
BETTER RETURNS
Sectors such as utilities, healthcare and other staples — usually seen as proxies for government debt due to their similar yields — lagged their European peers for the month as investors sought better returns from actual debt.
Still, the STOXX 600 has gained this month, helped by a rotation into energy, banking and mining stocks on expectations of a pickup in business activity following COVID-19 vaccine rollouts.
Travel and leisure was the strongest sector this month as investors bet on an economic reopening boom. Banks also outperformed their peers thanks to higher bond yields.
Better-than-expected fourth-quarter earnings have also reinforced optimism about a quicker corporate rebound this year.
Of the 194 companies in the STOXX 600 that have reported quarterly earnings so far, 68 percent have beaten analysts’ estimates, according to Refinitiv.
In London, the export-heavy FTSE 100 marked its weakest session since late October last year, snapping three straight weeks of gains.
MINING STOCKS DOWN
The FTSE 100 slipped 2.53 percent to 6,483.43, declining 2.12 percent from a week earlier.
Mining stocks, including Rio Tinto Group, Anglo American PLC and BHP, were the biggest drags on the index, while oil heavyweights BP PLC and Royal Dutch Shell fell, tracking a decline in oil and metal prices.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
PRESSURE EXPECTED: The appreciation of the NT dollar reflected expectations that Washington would press Taiwan to boost its currency against the US dollar, dealers said Taiwan’s export-oriented semiconductor and auto part manufacturers are expecting their margins to be affected by large foreign exchange losses as the New Taiwan dollar continued to appreciate sharply against the US dollar yesterday. Among major semiconductor manufacturers, ASE Technology Holding Co (日月光), the world’s largest integrated circuit (IC) packaging and testing services provider, said that whenever the NT dollar rises NT$1 against the greenback, its gross margin is cut by about 1.5 percent. The NT dollar traded as strong as NT$29.59 per US dollar before trimming gains to close NT$0.919, or 2.96 percent, higher at NT$30.145 yesterday in Taipei trading
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