Pare losses after U.S. opens with sharp gains
European stocks trimmed sharp losses in choppy Friday trade, after Wall Street surged at the open, partly reboundingafter a plunge on Thursday that yanked both the S&P 500 index and Dow into correction territory.
Stocks in Europe, however, were still on track for their worst week in two years.
What are markets doing?
The Stoxx Europe 600 index fell 0.7% to 371.68, building on a 1.6% loss from Thursday (http://www.marketwatch.com/story/european-stocks-head-lower-after-wall-street-fails-to-rebound-2018-02-08). The pan-European benchmark is now ontrack for a 4.2% weekly decline, which would be its biggest since February 2016.
Germany's DAX 30 index gave up 0.8% to 12,169.24, sliding into correction territory from its record high of 13,559.60hit on Jan. 23. A correction is defined as a pullback from a recent peak of least 10%. For the week, the index was ontrack for a 4.8% loss.
France's CAC 40 index sank 0.8% to 5,108.71, and the U.K.'s FTSE 100 index gave up 0.7% to 7,125.28 (http://www.marketwatch.com/story/ftse-100-drops-to-10-month-low-in-global-stock-smack-down-2018-02-09). The two benchmarks wereset for weekly losses of 4.8% and 4.3%, respectively.
The euro rose to $1.2255, up from $1.2249 late Thursday in New York.
What is driving the market?
The weakness in Europe followed Wall Street's Thursday plunge, with the Dow Jones Industrial Average tumbling morethan 1,000 points (http://www.marketwatch.com/story/dow-poised-to-edge-up-as-traders-lick-their-wounds-after-a-punishing-stretch-2018-02-08). That was the second time this week the U.S. blue-chip index logged a four-digit slide,having shed 1,175 points on Monday when the selloff set in.
After a bouncy futures session, U.S. stocks opened with firm gains on Friday (http://www.marketwatch.com/story/us-stock-futures-rise-as-dow-faces-worst-week-since-the-global-financial-crisis-2018-02-09), helping European marketsrecover from intraday lows.
The U.S. slump on Thursday also continued into Asian stock markets, which wrapped up their worst week in years (http://www.marketwatch.com/story/asian-markets-skid-after-wall-street-sinks-into-correction-territory-2018-02-08). Chinesestocks were hammered, with the Shanghai Composite Index sliding 4.1%.
Seen as driving the action were concerns over rising volatility (http://www.marketwatch.com/story/volatility-shock-wave-has-wiped-52-trillion-from-global-markets-sent-five-sectors-into-correction-territory-2018-02-08) and worries thatfaster-than-expected inflation could lead to more Federal Reserve interest-rate hikes (http://www.marketwatch.com/story/feds-george-says-three-rate-hikes-this-year-is-reasonable-baseline-2018-02-08) this year than expected. Analysts havealso noted that stocks globally were due for a pullback after scoring big gains in 2017 and in January.
Investors were also watching developments in Washington, where the U.S. government briefly shut down just pastmidnight. The House of Representatives voted early Friday for a two-year budget deal, approving a package that wouldreopen the federal government (http://www.marketwatch.com/story/senate-passes-budget-deal-as-government-remains-shut-down-2018-02-09). The House followed the Senate in approving the sweeping bill, which would also suspend the debt limitthrough March 1, 2019. President Donald Trump tweeted that he had signed the bill.
See:Is the decadeslong downtrend in interest rates finally over? (http://www.marketwatch.com/story/is-the-decades-long-downtrend-in-interest-rates-finally-over-2018-02-08)
Read:Volatility aftershocks? Here's what stock-market investors need to know (http://www.marketwatch.com/story/stock-market-investors-weigh-potential-aftershocks-from-volatility-spike-2018-02-08)
What are analysts saying?
"It would appear that the brief respite for stocks seen in the middle of the week turned out to be the eye of thestorm, as once again rising bond yields prompted a further bout of selling across the board, not only in the U.S. lastnight but in Asia again this morning," said Michael Hewson, chief market analyst at CMC Markets UK, in a note.
"Concerns about rising interest rates weren't helped by an unexpectedly hawkish inflation report (http://www.marketwatch.com/story/a-uk-rate-rise-in-may-analysts-digest-hawkish-surprise-from-boe-2018-02-08) from the Bank ofEngland yesterday, while the latest Chinese trade data suggested that the Chinese economy appeared to be ticking alongnicely, even if the trade surplus did shrink quite sharply as a result of a big jump in import," he added.
Which stocks are in focus?
Shares of A.P. Moeller-Maersk AS (MAERSK-B.KO) lost 0.6% after the Danish shipping company reported fourth-quarterprofit below analyst forecasts (http://www.marketwatch.com/story/maersk-swings-to-profit-expects-better-2018-2018-02-09).
Banks, which have been among hardest hit stocks in the selloff, extended their slump on Friday. The Stoxx 600 BanksIndex fell 1.2%, deepening its weekly loss to 4.1%.
On an upbeat note, shares of L'Oréal SA (OR.FR) climbed 1.6% after the French cosmetics group posted fourth-quarter sales that blast past expectations.
French industrial production rose slightly more-than-expected in December, climbing 0.5%. Meanwhile, in the U.K.industrial production fell 1.3% in December (http://www.marketwatch.com/story/uk-industrial-output-hit-by-north-sea-shutdown-2018-02-09) due to an emergency shutdown of a major North Sea pipeline.
-Sara Sjolin; 415-439-6400; AskNewswires@dowjones.com