Europe shrugs off pre-G20 China stocks slump, sterling steadies

Reuters: European shares bounced after two days of falls on Thursday and sterling steadied having been pounded all week by ‘Brexit’ fears, though a 6% drop in Chinese stocks kept worries over China’s economy on the boil.

Europe’s FTSEurofirst 300 was due a rebound having lost almost 4 % since Tuesday and it came through as solid company results from Seadrill and British bank Lloyds helped it claw back just over 1.3%.

Oil, the big market driver this year, was however beginning to slide back again and the slump in Shanghai underscored the nerves around China’s economy ahead of Friday’s G20 meeting there.

“At the moment the markets just feel like a chicken with its head cut off,” said Saxo Bank’s head of FX strategy John Hardy.

“Everything is swinging around on the daily moves on oil. There was a pretty remarkable comeback by Wall Street yesterday despite some weak data so it feels like it’s a bit dodgy till we get past the G20 meeting.”

Pressure is on G20 leaders to get the global economy back on track and calm markets after one of the rockiest starts to a year on record.

The IMF called on Wednesday for those countries that have the money to help boost growth and Chinese officials, speaking as G20 delegates started to arrive, moved to ease fears about another sharp drop in the yuan.

“We do recognise the risk the global economy faces,” China’s Deputy Finance Minister Zhu Guangyao said at a conference. “We also understand how important it is to correctly communicate with the market.”

Britain’s sterling was taking a much needed breather at $1.3915 GBP=D4, having plunged 5 % since early this month on fears a public vote on 23 June could see it become the first country to quit the 28-member European Union.

Dealers said there were also signs of downward pressure building on the euro despite a tick up in lending data ahead of next month’s European Central Bank meeting, at which rate setters are widely expected to cut rates again.

With doubts over whether the Fed can raise rates in March or indeed at all this year, the dollar was struggling to make much headway at $1.1017 per euro much headway at $1.1017 per euro. The slump in China also failed to boost safe-haven plays, the yen and Swiss franc. The slump in China also failed to boost safe-haven plays, the yen and Swiss franc.