Monday 19.00 GMT

What you need to know

  • Euro Stoxx 600 index snaps 3-day run of gains
  • Wall Street shut for Presidents’ Day
  • Dollar firm but still in sight of 3-year low
  • Energy stocks outperform as oil prices rise

European stocks came off the boil following the recovery of the past few sessions, with the closure of US and Chinese markets for holidays keeping activity light and sentiment subdued.

The energy sector outperformed as crude oil prices recouped more of their heavy recent losses. But consumer staples stocks were unsettled by a poor trading update from Reckitt Benckiser.

Mislav Matejka, equity strategist at JPMorgan Cazenove, reiterated his view that the recent correction in stocks should not become sustained — nor be seen as fundamental.

“We still believe that the correlation between bond and equity prices remains firmly inverse, ie that equities will tolerate higher yields,” he said.

“This is consistent with equities bouncing last week despite bond yields making clear new highs.”

The dollar managed to extend Friday’s rebound — albeit modestly — although the US currency stayed in sight of the three-year low hit against a basket of currencies at the end of last week.

And many in the markets saw further weakness for the dollar in the near-term, at least.

“The fact that the dollar sell-off ran out of steam on Friday afternoon does not lead me to hope that it is over,” said Ulrich Leuchtmann, currency analyst at Commerzbank.

“The dollar bears did so well recently that there was time for profit-taking ahead of the weekend.”

Analysts at ING said: “We are clearly witnessing a weak dollar environment, with early signs that investors are demanding concessions — both in FX and yields — to hold US bonds.

“[Monday’s] price action should be muted given the US market holiday, but starting Tuesday the focus will shift back to the Federal Reserve story, and the January Federal Open Market Committee minutes on Wednesday in particular.”

Equities

European stocks failed to hold to early gains as the lack of any lead from Wall Street made for a broadly lacklustre session.

The pan-regional Stoxx 600 index fell 0.6 per cent, with the Xetra Dax in Frankfurt shedding 0.5 per cent and the FTSE 100 ending 0.6 per cent lower.

Tokyo outperformed as a dip for the yen against the dollar encouraged buyers. The Topix index closed up 2.2 per cent, touching its best intraday levels in a week. Stocks in Sydney were also in positive territory with the ASX/S&P 200 finished up 0.6 per cent, while the Kospi Composite closed up 0.9 per cent in Seoul.

South African stocks edged back — after rallying strongly last week following the resignation of Jacob Zuma as president — as participants awaited a cabinet reshuffle ahead of Wednesday’s budget.

The FTSE/JSE Top 40 index slipped 0.8 per cent to 51,717.

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Forex

The dollar index, measuring the greenback against a basket of peers, crept up on Monday but remained near a three-year low. The measure was up 0.1 per cent at 89.23.

The euro was steady at $1.2404, while sterling was down 0.3 per cent at $1.4004. The dollar was up 0.2 per cent versus the yen at ¥106.56.

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Commodities

Brent crude, the international benchmark, was up 1 per cent at $65.48 a barrel, while US West Texas Intermediate was 1.2 per cent higher at 62.39 per barrel.

Gold was flat at $1,347 an ounce, but not far off an 18-month high. On Friday, gold touched near the highest intraday level since mid-2016, briefly breaking the $1,360 mark on the back of rising inflation and a weaker dollar.

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Additional reporting by Chloe Cornish in London and Edward White in Taipei

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