AFP and AP
LONDON/HONG KONG/SEOUL — European stock markets slid on Friday as a rally inspired by the U.S. interest rate hike petered out heading into the weekend break. Around midday, the Frankfurt, Paris and London markets were each down by 0.3 percent.
Europe’s main indices had rallied Thursday, led by Frankfurt which closed up 2.6 percent, after the U.S. central ended months of uncertainty surrounding interest rate policy. “While Wednesday’s Fed rate hike removed one cloud of uncertainty from the markets… speculation about when the next one is likely to occur is not expected to remain too far away,” said Michael Hewson, chief market analyst at trading group CMC Markets UK. “The Fed decision has clearly had no effect on the ongoing world of pain that oil prices find themselves in,” said Angus Nicholson, a market analyst at IG in Melbourne, Australia. “A wave of defaults and bankruptcies in the energy sector still looks likely to come, and these concerns are certainly weighing on markets.” The Fed raised its benchmark federal funds rate, locked near zero since the 2008 financial crisis, by a quarter point to 0.25-0.50 percent. The move highlighted a growing divergence in monetary policy between the U.S. central bank and its overseas counterparts. Japan’s central bank on Friday announced an unexpected tweak to its vast stimulus program, jolting financial markets and pushing the yen into a brief dive. The European Central Bank and Bank of England are also propping up the eurozone and British economy with billions of U.S. dollars worth of economic stimulus by buying assets such as bonds. In Friday trading meanwhile, Asian stock markets also fell back after a two-day rally, with commodity-linked shares again taking a hit. Wall Street’s three main markets had already been dragged down Thursday by energy firms as oil prices tanked again. Tokyo’s main index meanwhile tumbled 1.9 percent Friday, hurt also by a stronger yen after the action taken by the Bank of Japan. Hong Kong stocks ended the week on a negative note, as a two-day rally spurred by the US Federal Reserve’s interest rate hike faded, while Shanghai also closed marginally lower. The benchmark Hang Seng Index dipped 0.53 percent, or 116.50 points, to close at 21,755.56. In Shanghai the benchmark composite index gave up early gains to end marginally lower, losing 0.03 percent, or 1.04 points, to 3,578.96. It added 4.20 percent over the week.
And the Shenzhen Composite Index, which tracks stocks on China’s second exchange, slipped 0.28 percent, or 6.58 points, to 2,335.60 — though it has gained 6.36 percent since last Friday. Next week, investors will be keeping an eye on key U.S. data, including economic growth figures and existing homes sales, after the Fed rate move boosted hopes the world’s top economy was back on track. “Investors are keen to confirm the health of the U.S. housing market,” Nomura Securities said in a commentary. Key figures at 1100 GMT
London – FTSE 100: DOWN 0.3 percent at 6,084 points Frankfurt – DAX 30: DOWN 0.3 percent at 10,707 Paris – CAC-40: DOWN 0.3 percent at 4,663 EURO STOXX 50: DOWN 0.4 percent at 3,293 Tokyo – Nikkei 225: DOWN 1.9 percent at 18,986.80 (close) New York – Dow: DOWN 1.4 percent at 17,495.84 (close)