Europe’s stock markets came under pressure yesterday as a Spanish election brought uncertainty and weak eurozone data weighed, while China-US trade talks came back to the fore.
Oil prices extended losses, having shed three per cent on Friday after US President Donald Trump said Saudi Arabia and others in Opec had agreed to his request for higher crude output.
The focus in Europe was firmly on Spain, which now faces weeks of coalition talks after Prime Minister Pedro Sanchez’s Socialists won snap elections on Sunday without a majority, splitting the right-wing bloc but letting ultra-nationalists into parliament.
The results raise the spectre of another period of instability for Spain, with Sanchez depending on alliances with hostile rivals.
With the country set to return to the polls on May 26 for regional, local and European Parliament elections, a new government is not likely to be formed before June.
Madrid’s benchmark IBEX 35 index of major companies was the worst performer among leading European indices.
“The IBEX is underperforming the rest of the market which is not entirely unsurprising,” Oanda analyst Craig Erlam told AFP.
“Obviously the prospect of higher taxes and a less market-friendly government is not ideal for stock markets.”
Sentiment was also hobbled by news that economic confidence in the single currency area sank in April to hit the lowest level for more than two years.
“The need for a coalition in Spain, and a socialist one at that, much to the disappointment of investors, helped drag the IBEX lower,” said Spreadex analyst Connor Campbell.
“Combine that with news that economic confidence in the eurozone is at a two-year low, and there was little reason for the region’s indices to continue the kind of positive run that has been a fixture for most of April.”
Frankfurt stocks were also lower by mid-afternoon, while Paris was flat and London managed to reclaim slightly firmer territory. All three got a small lift from Wall Street opening slightly higher, as US stocks consolidated Friday’s record-breaking run.
In Asia, markets traded mixed as investors struggled to track another record lead from Wall Street that was fuelled by more strong corporate earnings.
Adding to the upward momentum was data showing the world’s biggest economy expanded 3.2 per cent in January-March, well up from forecasts and sharply higher than the 2.2 per cent seen at the end of 2018.
Hong Kong stocks rose one percent and Singapore added 1.3 per cent, while Shanghai slipped 0.8 per cent on concerns that Chinese authorities will wind back on recent market-boosting monetary easing measures. Tokyo is shut for holiday.