Europe midday: Stocks sag further after MPC, all eyes on White House, Beijing
Stocks have drifted a tad lower still come midday, after the Monetary Policy Committee appeared to leave the way open to a hike in May, amid expectations that the US would impose trade tariffs on China later on Thursday evening and reports that Beijing has also slated a series of retaliatory measures it may bring to bear in response.
Commenting on the current trade frictions globally, which were overshadowing the US central bank and Bank of England policy meetings, overnight ex-US Treasury Secretary Jack Lew told Bloomberg TV the current US administration was right to criticise China, but argued that simply shouting at China might nevertheless be self-defeating.
Weak prints on key manufacturing and business sector surveys - partly do to such trade tensions, but between the US and Germany or the European Union - were also weighing on sentiment.
As of 1217 GMT, the benchmark Stoxx 600 was off by 0.99% or 3.72 points to 371.18, alongside a 1.14% or 140.51 point fall to 12,168.86 on the German Dax while the Cac-40 was retreating 1.26% or 65.92 points to trade at 5,173.35.
In parallel, euro/dollar was still down a touch, dipping 0.18% to 1.2321, alongside a five basis point drop in 10-year German bund yields to 0.55%.
"New Fed chair Jerome Powell delivered the rate hike markets expected, but a more hawkish tone hints heavily at an increasingly aggressive rate tightening cycle, if not this year then certainly in 2019. That's backed up by Powell's comments around US economic growth and inflation, and of fellow policymakers's concerns about tariffs and trade policy that potentially threaten growth.
"It's possible that we could even see President Trump pull the trigger on a further $50bn of tariffs against China today, not steel this time but for intellectual-property violations. Trump's actions could easily escalate and derail not just the US economy, but others too. This is all food for the stock market bears both on Wall Street and in London," said Lee Wild, Head of Equity Strategy at Interactive Investor.
The key IHS Markit euro area manufacturing sector purchasing managers' index dropped from a reading of 59.6 for February to 56.1 in March, marking a significant shortfall versus forecasts for a reading of 58.2.
IHS Markit's Chris Williamson put down at least part of that weakness to bad weather in Northern Europe, but said other factors were "clearly at play", with the export order book having halved.
IFO's widely-followed German business confidence index also weakened, from 115.4 last month to an 11-month low of 114.7.
That was only a shade weaker than expectations for a reading of 114.8, but according to the research institute's president, "the threat of protectionism is dampening the mood in the German economy."
"It is reassuring to know that German exporters have a strong footprint in the EU. For instance, car producers shipped 12% of their total exports to the US last year but 54% went to the EU (China: 9%)," said Dr.Andreas Rees, chief German economist at UniCredit Bank.
"We think that there is no reason to become overly pessimistic. The latest business sentiment data (Ifo, PMIs) still signal respectable GDP growth ahead."