By Callum Keown
Faltering German giants led European stocks down on Tuesday as markets prepared for the Federal Reserve’s expected rate cut.
U.S. President Donald Trump dampened trade deal optimism with a Twitter tirade against China, sending stocks tumbling lower in the afternoon.
The Stoxx 600 /zigman2/quotes/210599654/delayed XX:SXXP -0.49% dropped 1.4% while the DAX /zigman2/quotes/210597999/delayed DX:DAX -0.62% was once again the worst performing major index, falling 2.1% - it’s sharpest fall since the beginning of February.
The FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX -0.44% lost its recent momentum, sliding 0.4% despite the pound continuing to tumble over the increased threat of a no-deal Brexit.
What’s moving markets?
The DAX suffered the most on Tuesday as German powerhouses Bayer /zigman2/quotes/210533053/delayed DE:BAYN -1.52% , the pharmaceutical firm, and airline Lufthansa /zigman2/quotes/205496028/delayed DE:LHA -1.79% posted downbeat updates.
German consumer confidence fell for a third consecutive month, according to research firm GfK, driven by trade tensions, Brexit risk and a global economic slowdown.
Later on Tuesday Trump spooked markets after a series of aggressive Tweets towards China, suggesting they “always change the deal in the end to their benefit.”
The Fed’s anticipated rate cut on Wednesday remained in focus but uncertainty lingered over further easing, which had already been priced in.
Speaking to MarketWatch, Neil MacKinnon, global market strategist at VTB Capital said: “A 25 basis point cut is widely expected by the markets with more loosening to come.”
He added: “The danger is that the Fed is underpinning a bubble in asset prices at a time of record global debt thus risking a repeat of another deep recession when the bubble bursts for whatever reason.”
Which stocks are active?
German airline Lufthansa fell 5.7% after reporting a drop in second-quarter net profit due to intense price competition on short-haul routes. The company said conditions would continue to be challenging for the rest of 2019, confirming previous cuts to its forecast.
British Gas owner Centrica /zigman2/quotes/205228367/delayed UK:CNA +1.77% plunged 13% as the company posted heavy half-year losses of £446m and announced that chief executive Iain Conn will step down next year. The utilities firm also slashed its dividend and revealed plans to exit oil and gas production.
Chemical and pharmaceutical giant Bayer warned that severe weather had impacted its crop-science division which could see it miss full-year sales targets. A further 5,000 lawsuits were also brought against the company in the past three months from people claiming its weedkiller Roundup caused cancer.