By Dave Morris
U.S. tariffs on Mexico stuck a pin into the rally that had pushed Thursday’s session into a positive close, sending European markets tumbling Friday.
How did markets perform?
The Stoxx 600 (STOXX:XX:SXXP) sank 1.3% to 367.3, after rising 0.4% in Thursday’s market session.
The U.K.’s FTSE 100 (FTSE:UK:UKX) moved down 1% to 7,146.6. On Thursday, it climbed 0.5%.
The pound (XTUP:GBPUSD) dipped 0.2% to $1.2585, adding to Thursday’s 0.3% downward move.
In Germany, the DAX (XEX:DX:DAX) dropped to 11,688.4, a decline of 1.8% after closing up 0.5% Thursday.
France’s CAC 40 (PAR:FR:PX1) retreated 1.4% to 5,175.6. It increased 0.5% Thursday.
Italy’s FTSE MIB (BORSA:IT:I945) fell to 19,620.2, down 1.6%. It shrank 0.3% Thursday.
Oil prices continued to fall Friday after declining dramatically Thursday on fears of slowing global growth. The West Texas Intermediate (WTI) crude oil benchmark , which retreated 3.8% Thursday, was down an additional 0.9% Friday to $56.07/bbl. The Brent crude benchmark , which also shrank 3.8% Thursday, lost an additional 1.1% Friday, moving down to $64.60/bbl.
What’s moving the markets?
U.S. President Donald Trump piled more tariffs on his trading partners, this time slapping a 5% fee on imports from Mexico that he said could rise to 15% unless the flow of illegal immigration coming through the country is stopped. The move was opposed by Democrats as well as members of Trump’s own Republican party including Senator Chuck Grassley, chair of the Senate Finance Committee. The administration is in the midst of attempting to build a border wall despite opposition in the courts, and is also locked in a trade dispute with China.
Perceived weakness in the global economy has hit the price of oil, despite supply constraints organized by the Organization of the Petroleum Exporting Countries (OPEC) and others such as Russia. U.S. crude oil inventories shrank by 300,000 barrels, according to the Energy Information Administration, versus S&P Global Platts’ expectations that they would shrink by 1.4 million barrels, on average.
In economic data, China’s purchasing manager index (PMI) manufacturing data for May showed a contraction in activity of 49.4, lower than the 49.9 reading economists had expected.
Germany retail sales, not seasonally adjusted, delivered a notable improvement. The year over year figure saw 4% growth in April versus 1.3% expected, far higher than the 2% contraction reported in March.
Which stocks are active?
Auto stocks were stung by U.S. tariffs on goods from Mexico, given the U.S. auto industry’s reliance on Mexico as a manufacturing center. Auto parts maker Faurecia SA (PAR:FR:EO) fell 4.2%, while merger candidates Fiat Chrysler Automobiles NV and Renault SA (PAR:FR:RNO) gave back recent gains, falling 5.4% and 5% respectively.
Oil stocks were also on the losing side of the market. Premier Oil PLC slumped 7.1%, John Wood Group PLC (LON:UK:WG) was down 4.4% and Tullow Oil PLC (LON:UK:TLW) fell 3.6%.
Budget airline Wizz Air Holdings PLC (LON:UK:WIZZ) shares fell 3.4% after it missed on earnings. Full year revenue was £1.707 billion, versus expectations of £1.712 billion. CEO Jozsef Varadi said: “Higher fuel prices are supporting a stronger fare environment and we expect these macro conditions to provide Wizz Air with market share opportunities.”