Markets falter as investors eye UK election, ECB, Comey

LONDON: Europe's main stock markets retreated Tuesday afternoon, two days before a British general election and an expected rise in US interest rates.

Britons head to the polls on Thursday, which is also when the European Central Bank (ECB) will announce its latest interest rate decision, while the US Fed is expected to announce a rise next week.

Thursday will also see testimony by former FBI chief James Comey, whom President Donald Trump fired last month amid a probe of his campaign's ties to Russia.

A little over two hours from the close, London stocks weakened 0.2 percent -- albeit the FTSE 100 index has risen 20 percent since voters' shock referendum decision almost a year ago to leave the European union.

Paris's CAC 40 gave up 0.8 percent, while Frankfurt fell 1.1 percent as German investors returned from a long holiday weekend.

In New York, the Dow shed 0.3 percent at the start of trading.

After enjoying a healthy rally in recent weeks, traders on most global markets took their cash off the table.

US brokerage Charles Schwab saw stocks extending Monday's falls ahead of the British election and an expected looming US interest rate rise.

"US stocks are adding to yesterday's declines in early action, with the global markets appearing cautious ahead of this week's UK election and monetary policy meeting from the European Central Bank, while next week the Fed is widely expected to raise interest rates," the brokerage said, adding that "political and geopolitical concerns also linger."

For Spreadex analyst Connor Campbell, "the markets remained relatively subdued this Tuesday, investors presumably sitting on their hands until Thursday's UK election/ECB meeting/Comey testimony triple-whammy."

Britons will vote amid a recent tightening in opinion polls between Conservative Prime Minister Theresa May and main opposition Labour leader Jeremy Corbyn.

- 'Closer than expected' -

"The UK parliamentary election on Thursday may turn out to be a closer race than expected just a few weeks ago," noted Richard Falkenhall, senior foreign exchange strategist at Swedish banking group SEB.

"While we believe that any outcome but a Tory majority would weaken the pound initially, it might in fact be the other way around over the longer term."

Asian equities also struggled as investors nervously await the week's key political events.

The crisis over Donald Trump's possible ties to Russia could come to the fore when Comey appears on Capitol Hill, a month after the president fired him midway through a probe into the allegations.

The Russia question, and the country's possible interference in November's US elections, has hung over the tycoon's head since taking office -- leading to calls for his impeachment.

There are concerns on trading floors that Trump's economy-boosting agenda -- big infrastructure spending, tax cuts and deregulation -- could be derailed. Stimulus hopes helped drive a months-long global markets rally after his election.

Among major losers on the day in Europe was Swiss pharmaceutical giant Roche, its share price diving 4.7 percent after a major clinical trial of a new anti-cancer medicine cocktail showed only a modest gain in survival rates -- at a cost per patient of some $70,000.

Elsewhere, oil prices edged down after Monday's losses as dealers looked past a decision by Saudi Arabia, the United Arab Emirates and Egypt to severe ties with Qatar, citing its support for terrorism.