A Royal Mail postal worker stands in the yard of a sorting office in Altrincham, Britain.
European stocks dropped on Thursday on concern the U.S. and China won’t imminently strike a trade deal.
The Stoxx Europe 600 SXXP, -0.38% weakened 0.38% to 402.28.
Concerns that the U.S. and China might not finish a so-called phase one trade deal this year, as well as the passage in the U.S. House of Representatives of a Hong Kong democracy bill, weighed on sentiment.
China’s vice premier, Liu He, reportedly said he’s “cautiously optimistic” about getting to a preliminary phase 1 trade pact with the U.S. but also said he was confused by U.S. demands. He reportedly invited his U.S. counterparts to Beijing for trade talks, according to The Wall Street Journal.
Even with losses for consecutive days, the Stoxx 600 is up about 19% this year. That makes equity strategists at Société Générale uncomfortable. “At a time when the U.S. economy is at the end of the cycle and central banks have already used up a lot of their ammunition, most notably the European Central Bank, the European equity market, in our view, offers an asymmetric risk/reward profile, with limited upside potential for 2020,” the financial services company said in a research report.
Its Stoxx 600 target for the fourth quarter of 2020 is 380.
Of stocks on the move, British American Tobacco BATS, +2.78% rose 3.2% and Imperial Brands IMB, +0.34% edged higher as the U.S. Food and Drug Administration delayed a plan to cut nicotine levels to minimally or nonaddictive levels.
Thyssenkrupp TKA, -9.60% fell 10.5% as the multinational conglomerate reported a 30% decline in adjusted earnings before interest and tax in the fourth quarter, and said next year’s adjusted earnings before interest and taxes will be flat.
Royal Mail RMG, -16.36% fell 16.6% as the privatized postal delivery firm said its transformation plan is “behind schedule,” requiring more investment because of what it called the “industrial relations environment” as well as the general election and Christmas. Its U.K. parcels, international and letters division is forecast to break even or lose money in fiscal 2021. “This will get worse before it gets better,” said analysts at Bernstein.
Royal Mail’s General Logistics Systems delivery service unit, however, reported a 17% increase in adjusted operating profit.