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European Stocks Sink as Trump Win Fuels Global Trade Concerns

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  • European Stocks Sink as Trump Win Fuels Global Trade Concerns

The bearish sentiment that engulfed European equities in recent weeks is being vindicated after results of the U.S. presidential election showed Donald Trump will govern the region’s biggest export market.

That’s bad news for European companies that get most of their revenue from America, after they fell more than twice as much as those more dependent on the region in the past two months. The Stoxx Europe 600 Index lost 1.8 percent at 8:10 a.m. in London, led by declines in banks and automakers. The euro earlier rose as much as 2.5 percent against the dollar.

Spanish lenders Banco Bilbao Vizcaya Argentaria SA and Banco Santander SA, which have high exposure to emerging-market assets, lost at least 5 percent. Credit Suisse Group AG, which relies on the Americas for more than a third of its revenue, retreated 3.5 percent. Daimler AG dropped 5 percent, leading carmakers lower. Randgold Resources Ltd. jumped 10 percent as gold soared the most since the Brexit referendum. A gauge of health-care stocks posted the only gain among industry groups, with Novartis AG, Novo Nordisk A/S and Roche AG contributing the most.

A win for Trump is a further setback for a bloc that has had to contend with the U.K. secession vote, as well as doubts over the health of its lenders and the efficacy of central-bank stimulus. While those concerns hurt companies dependent on domestic demand earlier in the year — just as a strengthening U.S. economy helped buoy exporters — the tables turned in the past weeks amid angst that the outcome of the presidential election could damp global trade.

“A Trump win is expected to damage trade,” said James Butterfill, head of research and investment strategy at ETF Securities in London. He’s been in the office since 3:30 a.m. “Traders are already expressing their worries through a depreciating dollar, which is bad news for European companies. Another problem for Europe is that there’s a populist wave going on, and this adds momentum to that. It’s worrying because we have so many elections coming up over here.”

European companies get about 17 percent of their total revenue from North America, with those in Belgium, Ireland and Switzerland among the most exposed, Morgan Stanley estimated in May. Europe is also the only region in the world that gets the majority of its sales from overseas, making it particularly vulnerable to global economic and political risks and to currency fluctuations. A stronger euro makes European products less competitive abroad.

Here are the moves for the region’s major national indexes:

  • Germany’s DAX Index lost 2.2 percent, led by Daimler.
  • France’s CAC 40 Index fell 1.9 percent, led by Axa SA.
  • The U.K.’s FTSE 100 Index slid 0.6 percent, dragged by banks and energy producers.

Through Tuesday, the Stoxx 600 had already lost about twice as much as the S&P 500 Index since a high on Sept. 5, while the region’s volatility gauge posted its second-longest run of gains on record. The European equity measure fell to a four-month low on Friday, completing its longest stretch without progress since 1994, amid a global selloff as the Federal Bureau of Investigation reignited controversy over Hillary Clinton’s e-mails. A subsequent second exoneration provided a fillip for the shares in the past two days.

A Goldman Sachs Group Inc. index of European firms that get about half of their sales from the U.S. declined 5.9 percent from the market’s peak in September through yesterday, compared with a drop of just 2.4 percent for a gauge tracking companies that mostly rely on Europe. European firms that sell to America have fared better than members of the domestic-exposed measure every year but one since 2008.

“The strong trading links and the fact that major European companies are pretty active in the U.S. make this a pretty significant outcome for stocks over here,” said Dirk Thiels, head of investment management at KBC Asset Management in Brussels. “A Trump win just injects uncertainty. We don’t know exactly what his plans are and to what extent he’ll be able to implement his policies.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade long experience in the global financial market.

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Silver Joins Haven Assets That Pullback on Dollar Strength

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Silver Pulls Back on Dollar Strength

Silver pulled back on Friday after Donald Trump-led administration announced it was working on a new stimulus package to ease economic burden of the American people.

The United States dollar gained as investors jumped on it to hedge against US-China trade tensions.

Silver that has risen to almost eight years high of $29.84 on Thursday but pulled back after the US government announced its plan on a new stimulus package.

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The haven asset, like Gold, pulled back to $27.97 on Friday during the New York trading session.

“While there are no early chart clues to suggest the gold and silver markets are close to major tops, both are now getting short-term overbought, technically, and are due for downside corrections in the uptrends,” Kitco Metals senior analyst Jim Wyckoff said in a note.

“And remember that with the higher volatility and bigger daily price gains seen at present, there will also be bigger downside corrections when they come.”

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Gold Pullback on Dollar Strength on Friday

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Gold Pauses its Bullish  Runon Dollar Strength

Gold pulled back from its record rally on Friday after the US dollar received a boost from the new stimulus.

The world’s safe-haven asset pulled back from $2074 per ounce it traded on Thursday to $2030 on Friday during the New York trading session.

XAUUSDWeekly“We’ll see some pullback (in gold) from these levels with USD bottoming for a while and maybe even see some strength in the USD in the near term, which will reverse these gains but not entirely,” said Spencer Campbell, director at SE Asia Consulting Pte Ltd. “People will be looking to re-enter the market on any pullbacks in precious metals as the medium to longer term views are significantly higher.”

Gold rose to an all-time high of $2074 on Thursday after rising over 35 percent on the back of the COVID-19 pandemic. However, economic uncertainties due to the second wave of COVID-19 continues to support gold rally and expected to continue until a concrete solution or vaccine is discovered.

“There are mixed signals that the economy is recovering and some of the signs of recovery are relatively superficial as they show aggregate figures and not how medium and small enterprises continue to suffer,” said Jeffrey Christian, managing partner of CPM Group.

“We have a very long way to go before we see a proper economic recovery.”

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Finances of International Oil Companies Suffered in the Second Quarter

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Finances of IOCs Plunged Amid COVID-19 Pandemic in the Second Quarter

Global leading oil companies suffered substantial losses in the second quarter, according to their various financial statements published in recent weeks.

On Thursday, Royal Dutch Shell posted $18.9 billion loss in the second quarter of 2020, far below the profit of $3.5 billion posted in the same quarter of 2019.

This, the company attributed to the plunge in global oil prices in 2020 due to the COVID-19 pandemic. Shell warned that oil demand remained uncertain, adding that it had cut its exploration plans for this year from about 77 wells to just 22.

This was after the price of Brent crude oil plunged to $15 per barrel during the peak of COVID-19 pandemic while the price of West Texas Intermediate crude oil dipped to -$37 per barrel, the lowest on record.

Also, the company said it has reduced its capital expenditure for the year from the initial $25 billion to $20 billion amid a plunge in revenue and demand for the commodity.

Similarly, ExxonMobil reported a $1.1 billion loss, its biggest decline on record. The oil company also announced it would be lowing spending by 30 percent in 2020 to about $23 billion.

Among the various oil companies posting negative financial statements for the quarter was Chevron Corporation, the company reported $8.3 billion decline in the second quarter of the year. The lowest ever posted by the oil giant in almost three decades.

Chevron, therefore, warned that the havoc caused by COVID-19 pandemic in the energy sector might continue to weigh on earnings.

“While demand and commodity prices have shown signs of recovery, they are not back to pre-pandemic levels, and financial results may continue to be depressed into the third quarter of 2020,” Chevron’s Chairman and Chief Executive Officer, Michael Wirth, said.

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