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European stocks drop as US stimulus impasse weighs

  • "By December 2021, global oil consumption will still be two percent lower than at the end of 2019," the IEA said.
Published August 13, 2020
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LONDON: European stock markets fell and the dollar weakened Thursday after a mixed showing for Asian equities, as investors fretted over US lawmakers' failure to find common ground on a rescue package for their beleaguered economy.

Oil prices edged lower, as the International Energy Agency cut its 2020 forecast for global oil demand to 91.9 million barrels per day, the first downgrade in a number of months.

"By December 2021, global oil consumption will still be two percent lower than at the end of 2019," the IEA said.

At around mid-session, London shares were down by 0.9 percent, while stock prices in Frankfurt and Paris eased by 0.2 percent. Earlier in Asia, investors had struggled to maintain momentum following a strong start.

Tokyo ended up 1.9 percent as a recent drop in the safe-haven yen boosted exporters, while Singapore and Manila also added more than one percent. Seoul, Taipei, Jakarta and Wellington were also higher.

But Hong Kong dipped 0.1 percent, Sydney fell 0.7 percent and Manila shed 0.4 percent.

On Wednesday, Wall Street had seen sharp gains after a forecast-busting jump in US inflation that indicated the key consumer sector was revving up again.

There was cheer also about Joe Biden's choice of Kamala Harris as his running mate for November's US Presidential election, with observers pointing out that she is not considered anti-business and was a more centre-ground politician than other options.

But stalled stimulus talks in Washington dampened the mood, traders said.

Traders have continued to bet on Congress eventually agreeing on a new pandemic deal despite long-running animosity between Democrats and Republicans.

Both sides are blaming each other for the lack of movement, with Treasury Secretary Steven Mnuchin saying House Leader Nancy Pelosi would not budge unless their demand for spending of at least $2 trillion is met.

That is well down from the $3.5 trillion initially proposed by Democrats but Republicans say they are unwilling to shift from their $1-trillion plan.

US-China talks

There is also a focus on this weekend's US-China talks to review their trade pact signed in January.

There had been concerns that rising tensions between the superpowers could scupper the agreement, which ended a painful and long-running trade war that battered the global economy.

But top officials on both sides have expressed confidence the deal will be kept in place and analysts said there was little desire from either side to scrap it.

"From the US perspective, imposing more trade taxes on US companies in the middle of a pandemic would generally be considered a bad thing for the stock market," said Stephen Innes at AxiCorp.

"After touting the stock market's miraculous recovery Trump would be vehemently against anything that would trigger a drop in stocks," he added.

"From China's perspective, Xi probably wants to keep US relations on good terms, given the strong likelihood of a change in the US administration with Democrats polling well."

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