Europe: Shares slip as markets unfazed by US-China deal

EUROPEAN shares saw their early gains evaporate, closing in the red on Wednesday, as the much-anticipated US-China trade talks offered scant details, despite promises of high-level agreements.

The pan-European Stoxx 600 had risen following a cooler-than-expected US inflation report that eased tariff-related concerns and bolstered hopes for the Federal Reserve to cut rates.

However, the index ultimately closed 0.27 per cent lower at 551.64 points- its third straight day of losses.

Meanwhile, a day after officials from Washington and Beijing agreed on a framework to restore their trade truce, President Donald Trump said the US-China deal was done, with Beijing set to supply magnets and rare earth minerals.

According to a White House official, the agreement with China allows the US to charge a 55 per cent tariff on imported Chinese goods, including a 10 per cent baseline “reciprocal” tariff, a 20 per cent tariff for fentanyl trafficking and a 25 per cent tariff reflecting pre-existing tariffs. China will charge a 10 per cent tariff on US imports, the official said.

Investors in Europe responded cautiously, while the talks ended in a truce, analysts said investors had hoped for more substantial progress.

“Markets had a lot of hopes that folks in London were going to see some major breakthrough and essentially all it’s done is reiterate what they had a month ago,” Daniela Hathorn, senior market analyst at Capital.com.

The benchmark index, however, was still 2 per cent shy of its February all-time high.

Europe, once a prime beneficiary of the rotation out of US assets, now finds itself gripped by a pervasive caution due to Trump’s mercurial tariff policies.

The biggest catalysts for European markets are increased defence spending and the European Central Bank cutting borrowing costs. However, ECB officials have indicated that the easing cycle will come to an end. Traders are pricing in just one more rate cut by the tail-end of this year.

“Investors piled into European markets and have taken advantage of that cheap equity market, it’s now a case of what else is going to continue to power this drive,” Hathorn added.

On the markets side, the utilities sector, often traded as a bond-proxy, emerged as the day’s top sectoral performer.

Conversely, retailers led the decline, sinking 1.7 per cent due to a 4.4 per cent drop in Inditex after the Zara owner missed first-quarter sales forecasts.

British homebuilders Bellway and Vistry saw their shares rise following finance minister Rachel Reeves’ announcement of a £39 billion (S$67.5 billion) decade-long affordable housing programme that will nearly double annual spending on low-cost homes.

London’s FTSE 100 was up 0.1 per cent while mid-cap FTSE 250 rose 0.2 per cent. REUTERS