Global stocks sold off while investors raced for the safety of the Japanese yen and some government bonds on Wednesday as concerns rose that setbacks to US-China trade talks would undermine world economic growth.
US president Donald Trump said trade discussions with China would need to be rerouted, saying the current track appeared "too hard to get done" and any agreement reached between the world's two largest economies needed "a different structure"." The remarks came a day after Mr Trump said he was not pleased with US-China talks, reversing a rally pegged to the White House's optimistic comments about the discussions over the weekend that led to a strong rally on Monday. The pan-European FTSEurofirst 300 index lost 1.17 per cent and MSCI's gauge of stocks across the globe shed 0.67 per cent.
Another reason for the euro's woes is Italy, where an incoming coalition government comprised of the two anti-establishment parties – the League and 5-Star – looks likely to implement big-spending policies. That could add to the country's big debt pile and see Rome clash with the European Union.
The Iseq sank 53 points to 7,143, effectively tracking the trend internationally. Independent News & Media (INM) closed up 1 per cent at 9 cents following another tumultuous day for the company, which saw the group's editor-in-chief, Stephen Rae, and Paul Connolly, businessman Denis O'Brien's last remaining nominee to the board, step down. The media group has been mired in controversy for months over an alleged data breach that may have compromised journalists' sources.
Paddypower Betfair was also down marginally at €97.90 after announcing it had agreed to merge its US business with fantasy sports company FanDuel to target the US sports betting market that is set to open up in the coming years. New York-based FanDuel has a more than 40 per cent share of the US daily fantasy sports market, according to Paddy Power.
Bank of Ireland was down 1 per cent at €7.35 while rival AIB was down 0.2 per cent at €4.95. Iseq heavyweight Ryanair fell marginally to €16.64 after posting a strong set of results earlier in the week.
Glanbia rose 1.3 per cent to €14.86 after hosting a markets day for investors in Chicago.
The UK's top share index was knocked down of its highs on Wednesday and sustained its biggest loss in two months as oil majors and commodity-related stocks fell but well-received results made Marks & Spencer a bright spot. The blue chip FTSE 100 index closed down 1.17 per cent at 7,785.08 points. A surprise fall in British inflation pushed sterling to its lowest level against the dollar this year but failed to provide any tailwind to companies whose revenues are in foreign currencies.
Energy stocks took about 37 points off the index as shares in Royal Dutch Shell fell 3.3 per cent and BP declined 1.9 per cent. Oil benchmarks fell after an unexpected build in US crude and gasoline inventories and as traders weighed the possibility of an increase in Opec crude output to cover any shortfalls in supply from Iran and Venezuela. A rise in Brent Crude to $80 per barrel this year has been a big help for both oil majors, with BP still up more than 10 per cent and Royal Dutch Shell up 6.8 per cent year to date.
There were also big losses among miners such as Anglo American down 5 per cent, Rio Tinto down 3.2 per cent or Antofagasta down 2.7 per cent.
Marks & Spencer shone despite the risk-off mood and was the biggest gainer with a 5.2 per cent rise after the retailer gave a full-year update. While it reported a second straight decline in annual profit and saw like-for-like clothing and home sales fall in the fourth quarter, investors were positive that the retailer had kept its outlook and not cut its dividend.
Italy’s FTSE MIB hit its lowest level since early April as a sell-off in government bonds resumed and bank stocks .
"Italy remains centre stage with its political developments," said Alessandro Balsotti, portfolio manager at JCI Capital. "The minister and economy minister choices and the actual creation of a government rather than new elections will be the drivers for investors in Italian assets in coming weeks."
The FTSE MIB has fallen 4.5 per cent so far in May and is on track for its worst month in nearly two years.
Deutsche Bank closed 0.6 per cent lower at €10.90 euros in Frankfurt on Wednesday after it was reported that it was considering 10,000 job cuts and retreating from equities markets across the world as part of a sweeping overhaul by chief executive Christian Sewing. The stock has lost about 31 per cent this year, making it the worst-performing major European bank.
US stocks fell after president Donald Trump injected a fresh dose of uncertainty into the outcome of US-China trade talks by suggesting that any possible deal needed “a different structure”.
Mr Trump signalled a new direction for the trade talks, saying the current track appeared “too hard to get done”, a day after telling reporters that he was not pleased with the recent talks.
At 9:59am EDT the Dow Jones Industrial Average was down 76.00 points, or 0.31 per cent, at 24,758.41, the S&P 500 was down 8.64 points, or 0.32 per cent, at 2,715.80 and the Nasdaq Composite was down 22.63 points, or 0.31 per cent, at 7,355.82. US10-year treasury yields fell to eight-day lows as investors shunned risk. Of the 11 major S&P sectors, only utilities and real estate, sectors seen as bond proxies due to their high dividend yields, were higher.
Leading the decliners was the financial sector, down 0.9 per cent. Industrials, which as a group are the most sensitive to trade issues, fell 0.5 per cent. Retailers had a mixed day. Target sank 5.1 per cent after the retailer's quarterly profit rose less than expected as increasing investments dented margins. Tiffany surged 16.2 per cent after the jeweller's quarterly results blew past estimates and the company also raised its full-year profit forecast and announced a $1 billion share buyback programme. – Additional reporting by Reuters