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Commodity stocks weigh on European markets as oil and metal prices slip

MarketWatch logo MarketWatch 3/2/2021 Jack Denton
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EUROPE MARKETS

European stocks were flirting with giving up some of the gains made earlier in the week, as lower commodity prices weigh on indexes and investors continue to keep a wary eye on bond yields and central banking policy.

The pan-European Stoxx 600 was up 0.1%, while London’s FTSE 100 rose 0.3%. Both the CAC 40 in Paris and Frankfurt’s DAX were 0.1% higher. Stocks had a standout day on Monday, with the Stoxx 600 rising 1.8% amid a wider global rally.

Dow futures were pointing down 120 points, set for a weak open after the Dow surged more than 600 points on Monday to close at 31,535.

European stocks opened lower to chase down Asian equities, which slid following a warning from China’s top banking regulator that stocks on Wall Street and elsewhere in the world look like bubbles that will eventually correct.

Lower commodity prices contributed to the weight on indexes, but were outbalanced as a wave of positive earnings reports added buoyancy to markets. The recent rise in bond yields, and concerns over central banking policies as the global economy turns to recovery from the COVID-19 pandemic, remained macro concerns.


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European markets “are trading more cautiously this morning, slipping back initially in early trade, before edging into positive territory, as investors mull whether a change in tone from the Federal Reserve is forthcoming with respect to their recent ambivalence on the recent sharp rise in U.S. bond yields,” said Michael Hewson, an analyst at CMC Markets.

“The main drags in early trade are in basic resources with lower oil prices pulling on the likes of BP and Royal Dutch Shell,” Hewson added.

Oil prices are lower, with benchmarks Brent crude and West Texas Intermediate both down around 1%. Brent was trading around $63 a barrel while WTI held on above the $60 a barrel mark. Major European-listed oil stocks all fell, with shares in BP Royal Dutch Shell Total and Eni slipping.

Gold and silver are also in the spotlight, with silver down near 2%. Shares in metals and mining giants, which weigh heavily on the FTSE 100 index, fell in early trading. Polymetal International Fresnillo Glencore Antofagasta and Anglo American were among the stocks making the biggest moves.

British house builder Taylor Wimpey was a standout riser in London trading, with shares up more than 2% following full-year results. The group will resume its dividend after a shaky year in which profits fell more than 67%.

Shares in Swiss confectioner Lindt & Sprüngli were also sweet, up more than 2.5% after full-year results included an upbeat outlook. Organic sales melted away by 6% in 2020, but the chocolatier expects sales growth in the range of 6% to 8% in 2021.

Online fashion retailer Boohoo may face an import ban from the U.S., according to a report from Sky News, following a campaign highlighting allegations that the retailer used slave labor. The British company said it was confident in the actions it was taking to ensure that its products meet U.S. standards on forced labor. Shares in Boohoo fell near 5%.

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