Stock markets drop after run higher

LONDON: Stock markets dropped Thursday on profit-taking after a recent run higher on optimism on trade deals.

Wall Street opened lower, with the Dow dipping 0.1 percent in the first minute of trading, a day after the S&P 500 and Nasdaq Composite set fresh records on news that Canada and the United States were close to a deal on reviving the North American Free Trade Agreement, as well as better-than-expected US growth data.

Analysts said concerns about US-China trade relations also dented sentiment Thursday.

"US stocks are retreating a bit in early action from a recent rally to record highs, amid a host of mixed earnings reports and lingering global trade uncertainty as China and US relations questions appear to be countering signs of progress on NAFTA negotiations," said analysts at Charles Schwab brokerage.

For most of this year world markets have been under pressure as China and the US have threatened and imposed tit-for-tat tariffs that fuelled fears of a global trade war, while Washington has also picked fights with allies including the EU, Canada and Mexico.

In Europe, London, Paris and Frankfurt stocks were around a half of a percentage point lower in afternoon trading.

Asian dealers also took a step back after a healthy run this week.

Tokyo ended Thursday up 0.1 percent but Shanghai sank more than one percent and Hong Kong lost 0.9 percent.

Singapore lost 0.5 percent, Seoul was off 0.1 percent and Sydney was marginally lower, while there were also losses in Wellington, Taipei and Mumbai.

In currency trading, the pound held up fairly well versus the dollar after rallying on Wednesday thanks to the European Union's top negotiator saying that the bloc was open to a unique deal with Britain, which raised hopes the country will leave the bloc with a working relationship.

The Turkish lira suffered fresh losses dropping 4.5 percent against the dollar, bringing the total plunge since the start of the year to nearly 45 percent which has led economists to warn of a full-blown recession.

"The latest Turkish activity data suggest that the plunge in the lira since May, and the associated sharp tightening of financial conditions, has tipped the economy into recession. Things are only likely to get worse," Capital Economics said in a note.

The currency had already been hit by concerns over monetary policy under President Recep Tayyip Erdogan but plunged further this month after a public spat with the United States.

The Turkish central bank has sought to assuage fears by introducing a raft of measures to keep financial stability and ensure banks have sufficient liquidity.

But analysts say such measures are not enough and call for a sharp hike in interest rates -- strongly opposed by Erdogan's government which sees economic growth as its top priority.

In government debt markets, Italy sold 10-year bonds at a 3.25 percent rate of return for investors, crossing the 3.0 percent threshold for the first time since May 2014.

The yield on Italian debt has shot over the 3.0 percent level in the secondary markets several times in recent months as an anti-establishment coalition came to power and has signalled changes to economic and budget policy.

Higher borrowing costs could put additional strain on Italy, which has the largest debt in the eurozone and where growth was tepid.

- Key figures around 1330 GMT -

New York - Dow Jones: DOWN 0.1 percent at 26,090.36 points

London - FTSE 100: DOWN 0.6 percent at 7,514.73

Frankfurt - DAX 30: DOWN 0.6 percent at 12,487.27

Paris - CAC 40: DOWN 0.4 percent at 5,477.10

EURO STOXX 50: DOWN 0.7 percent at 3,430.63

Tokyo - Nikkei 225: UP 0.1 percent at 22,869.50 (close)

Hong Kong - Hang Seng: DOWN 0.9 percent at 28,164.05 (close)

Shanghai - Composite: DOWN 1.1 percent at 2,737.74 (close)

Euro/dollar: DOWN at $1.1662 from $1.1709 at 2100 GMT

Pound/dollar: DOWN at $1.3000 from $1.3028

Dollar/yen: DOWN at 111.37 yen from 111.68 yen

Oil - Brent Crude: UP 60 cents at $77.74 per barrel

Oil - West Texas Intermediate: UP 42 cents at $69.93