MN: European Stocks Fall, Sterling Drops -- Update
European stocks fell on Monday morning, despite positive economic data from Germany, the region's largest economy.
The Stoxx Europe 600 fell by 0.5% in late-morning trading. Official German economic data showed a 2.2% rise in industrial production year-over-year in November and a 5.6% rise in exports.
The banking and energy sectors, which have helped to power the recent rally, fell on Monday. Stoxx 600 oil and gas stocks were down by 0.88%, while Stoxx 600 bank stocks were down 1.1%.
In the U.S., S&P 500 futures and Dow Jones Industrial Average futures fell 0.07% and 0.05%, respectively. The Dow rose to as high as 19999.63 on Friday, just shy of the totemic 20000 milestone.
In currency markets, the pound slumped to its lowest since October against the dollar, falling by more than 1% to $1.216 as European markets opened.
The U.K.'s FTSE 100, which tends to benefit from a fall in sterling, was one of the few European indexes in the green Monday, rising 0.1% to a fresh record high.
The drop in sterling follows comments from British Prime Minister Theresa May on Sunday, saying that the U.K. would make a definitive break with the European Union.
The government has promised that Article 50--the formal starting gun that begins a two-year Brexit negotiation period--will be triggered by the end of March.
"The government appears ill-prepared for the Brexit talks," a research note from J.P. Morgan researchers said. According to the analysts, of the widely traded group of 10 currencies, only sterling remains overvalued against the dollar.
The improved German data followed a string of consumer and business surveys, which suggest the economic outlook in the eurozone is improving.
"Everything seems to be looking better in Europe," said Emily Nicol, economist at Daiwa Capital Markets. "The sentiment data has been really positive, up to the highest since the 2011."
Positive data has also led some analysts to upgrade their expectations for European stocks.
"More than stronger long-term growth prospects, we think that receding concerns are the main reasons for the European equity market to climb higher," said Goldman Sachs analysts in a research note. The bank has upgraded its forecast for Stoxx Europe 600 returns over the next three months, to 2.6% from minus 4.3%.
Boston and Atlanta Fed Presidents Eric Rosengren and Dennis Lockhart are scheduled to speak later today, with investors listening for hints as to the path of U.S. monetary policy.
Mr. Rosengren is currently a voting member of the rate-setting Federal Open Market Committee. Mr. Lockhart will be leaving his post at the end of February.
Global government bond yields fell slightly, with Germany's 10-year bund yield down from 0.298% at Friday's close, to 0.29%. U.S. 10-year Treasury yields fell from 2.421% to 2.396%.
Hong Kong's Hang Seng and China's Shenzhen A-share indexes closed up 0.25% and 0.3%, respectively. Japanese markets were closed for a public holiday Monday.
