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StockBeat - Fed Pivot Sinks Stocks, Just Like the ECB's Did

By Geoffrey Smith

Investing.com -- For the second time in a month, Europe’s stock markets are reacting negatively to central bank action that could reasonably have been expected to support them.

The Federal Reserve’s decision to implicitly abandon the idea of further interest rate increases this year has pushed markets lower, not higher, as market participants focus more on the pessimism about the economic outlook that underlies that development.

At 05:00 AM ET (09:00 GMT), the benchmark Euro Stoxx 600 was down 0.68 points, or 0.2% at 380.08. Germany’s Dax was down 0.4% and France’s CAC 40 was flat.

The only clear outperformer was the U.K. FTSE 100, up 0.4% thanks entirely to its natural resources companies. The Fed’s action has made the dollar cheaper and depressed dollar yields, and that should support global demand for commodities which are priced in dollars. It will also make it easier for emerging markets to finance their dollar-denominated debts.

The news out of the Fed pushed the price of U.S. crude over $60 a barrel, and pushed the price of the international benchmark Brent as far as $68.69 – a four-month high for both blends. Consequently, oil majors BP (LON:BP) and Royal Dutch Shell (LON:RDSa) are up some 1%, while smaller producers such as Lundin Petroleum AB (ST:LUPE) and Tullow Oil (LON:TLW) are outperforming.

Mining stocks are faring even better: BHP Billiton (LON:BHPB), Glencore (LON:GLEN), Rio Tinto (LON:RIO) and Antofagasta (LON:ANTO) are all up by over 2%. Miners and oil companies are getting a double-lift from Prime Minister Theresa May's single-handed attempts to wrestle the pound lower by threatening a no-deal Brexit on Wednesday evening.

The only other outperformers of note are semiconductor stocks. That’s a result of U.S. chipmaker Micron (NASDAQ:MU) predicting an upturn in the global market in the second half of the year. Germany’s Infineon (DE:IFXGn) and France-based STMicroelectronics (PA:STM) are both leading their respective indexs, up 1.3% and 2.0% respectively.

Among the biggest losers – Deutsche Bank (DE:DBKGn) and Commerzbank (DE:CBKG), both down 3.5% after strong pushback from regulators against their proposed merger.

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