FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, January 7, 2020. REUTERS/Staff
January 8, 2020
By Ambar Warrick
(Reuters) – European shares dropped on Wednesday after an Iranian missile strike on U.S. forces in Iraq prompted moves out of risk assets, while signs of a sustained manufacturing slump in Germany spelt further gloom for the region.
The pan-European STOXX 600 equity index <.STOXX> was down 0.4% by 0906 GMT, with German stocks <.GDAXI> leading declines.
The recent strike, which Iran said “concluded” its response to the U.S. killing of one of its top military commanders, now raises the question of retaliation by the United States, with a statement from U.S. President Donald Trump expected later in the day.
“Clearly markets will await a possible reaction from the United States,” said Teeuwe Mevissen, senior market economist at Rabobank in Amsterdam. ” But I think it’s also clear that both countries have very little to gain with further escalation of this conflict.”
Mevissen said that while the strike resulted in heightened tensions, it would likely “flow out of markets” in the near term amid a lack of further escalation.
German stocks fell as much as 0.9% after the country’s industrial orders fell unexpectedly in November on weak foreign demand and a lack of major contracts.
Europe’s largest economy has been struggling with slowing factory activity over the past year due to global trade and political ructions.
Most European subindexes were lower, with real estate stocks <.SX86P> leading the declines. Oil and gas stocks <.SXEP> relinquished early gains and traded flat after oil prices retreated from a more than three-month high. [O/R]
Europe’s travel and leisure sector <.SXTP> also dipped as recent strength in oil prices pressured major airline stocks.
Planemaker Boeing’s <BA.N> European suppliers, Senior Plc <SNR.L> and Safran <SAF.PA>, fell after a Boeing 737 belonging to Ukraine International Airlines crashed after taking off in Iran.
Markets now await economic sentiment and consumer confidence data from the euro zone for December, due later in the day. Sentiment in the services sector is expected to have improved from the prior month, according to a Reuters poll.
(Reporting by Ambar Warrick in Bengaluru; Editing by Arun Koyyur)
