European stock markets finished lower Thursday, pulling back from a one-month high as mining stocks tracked a selloff in the metal prices, and the latest round of earnings reports rolled out.
U.K. stocks bucked the negative trend after disappointing retail sales data sparked renewed weakness in the pound.
What are markets doing?The Stoxx Europe 600 index SXXP, -0.23% ended down 0.2% at 386.17, after scoring its highest close since June 15 on Wednesday.
The U.K.’s FTSE 100 index UKX, +0.10% added 0.1% to 7,683.97, as the pound GBPUSD, -0.6197% dropped to a 10-month low against the dollar. Sterling bought $1.2987, down from $1.3071 late Wednesday in New York.
Germany’s DAX 30 index DAX, -0.62% lost 0.6% to 12,686.29, while France’s CAC 40 PX1, -0.56% fell 0.6% to 5,417.07.
The euro EURUSD, -0.2749% traded at $1.1603 compared with $1.1641 on Wednesday.
What is driving the market?Mining stocks weighed on the pan-European benchmark as metals prices faltered under the weight of a rising dollar. Metals are priced in the buck, so they become more expensive to buy for other currency holders when the dollar DXY, +0.37% appreciates.
The Stoxx 600 Basic Resources Index SXPP, -1.59% slumped 1.6%, setting it on track for a sixth straight week of losses. Gold GCQ8, -0.89% was down 0.9% at $1,216.50 an ounce.
U.K. stocks, however, managed to eke out a gain after disappointing British retail sales stoked speculation the Bank of England may refrain from hiking interest rates in August. Sales fell 0.5% month-on-month, missing forecasts of a 0.3% rise. The quarterly data, however, painted a more rosy picture, with sales up 2.1% in the second quarter—the largest increase since February 2015, according to the Office for National Statistics.
What are strategists saying?“From a historical perspective, July has tended to be a positive month for risk, and so far the equity market appears to be playing along,” said strategists at Morgan Stanley in a note.
“FX markets do not appear to have got the memo, though. The 0.6% gain in DXY DXY, +0.37% month-to-date contrasts with the average July return of -0.4% (a weaker USD is what we would expect in a risk-positive environment),” they added.
“GBPUSD, which historically averages a 1% gain in July, is down 1%—and GBP tends to have a positive relationship with risk. The market’s preference for the USD is reflected in positioning, with the market net short all G10 currencies save for the U.S. USD bullish sentiment continues to sit near contrarian overbought levels,” they said.
Which stocks are in focus?Publicis Groupe SA PUB, -8.78% slumped 8.8% after reporting revenue that missed forecasts. Shares of competitor WPP PLC WPP, -2.93% dropped 2.9%.
Anglo American PLC AAL, -4.08% gave up 4.1% after a production update.
ABB Ltd. ABBN, +2.82% rose 2.8% after the Swiss tech company’s second-quarter earnings topped estimates.
Volvo AB VOLVB, +1.48% added 1.5% after the Swedish truck maker posted a forecast-beating 59% rise in second-quarter profit.
Shares of Iliad SA ILD, +7.44% rallied 7.4% after news late Wednesday the company’s Italian arm has signed up its first million mobile subscribers just 50 days after its launch.
