European equity markets were pressured Tuesday as the International Monetary Fund cut its growth forecasts after Britain’s EU exit, which also appeared to be casting a shadow over Germany’s outlook.
Declines in Paris and Frankfurt came as the Dow climbed to a fresh record in the US and the dollar strengthened on the comparatively benign outlook of the American economy.
“The outperformance of the US economy, safety of US assets and steady monetary policy makes American investments attractive and keeps the dollar in demand,” said Kathy Lien of BK Asset Management.
The IMF trimmed its forecasts for growth to 3.1 percent this year and 3.4 percent in 2017, both down 0.1 percent from the prior estimates.
The IMF also downgraded its 2016 growth forecast for the British economy by 0.2 percentage points to 1.7 percent.
Nevertheless, London’s benchmark FTSE 100 index appeared to shrug off the gloomy prediction, closing almost flat.
A leading survey showed Tuesday that investor confidence in Germany fell to its lowest level in nearly four years in July on concerns about the Brexit fallout.
Focus in the US was dominated by earnings announcements from big companies, with most companies meeting or exceeding expectations.
But Netflix slumped 13.1 percent after reporting disappointing subscriber growth in the second quarter. That weighed on the Nasdaq, which fell 0.4 percent.
– Impact of weak pound –
Britain’s annual inflation rate meanwhile rose last month from May, separate data showed, and faces further gains as a weak pound caused by the Brexit vote raises import prices.
The 12-month Consumer Price Index rose by 0.5 percent in June, the Office for National Statistics said in a statement.
“Sterling’s weakness means higher import prices, and this is expected to feed through to significantly higher inflation figures in the coming months,” said Ben Brettell, senior economist at stockbroker Hargreaves Lansdown.
Italian bank shares took a hit following a ruling by the EU’s top court upholding rules that require investors to accept losses before state aid is used to shore up lenders.
Shares in Banca Monte Paschi di Siena closed 3.3 percent down.
With a key referendum on political reforms months away, Italy’s government wants to avoid inflicting losses on the many small investors who bought up unsecured bank debt.
Elsewhere Tuesday, Asian stock markets mostly fell on profit-taking following a week-long rally — but Tokyo headed for a sixth straight gain as a weak yen boosted exporters, traders said.
The rally in Japan’s export sector was enough to offset a more than 10-percent plunge in mobile giant SoftBank, which was hammered after announcing a $32-billion deal Monday to buy British chip designer ARM Holdings.
– Key figures at 2100 GMT –
New York – DOW: DOWN 0.1 percent at 18,559.01 (close)
New York – S&P 500 DOWN 0.1 percent at 2,163.78 (close)
New York – Nasdaq: DOWN 0.4 percent at 5,036.37 (close)
London – FTSE 100: UP less than 0.1 percent at 6,697.37 points (close)
Frankfurt – DAX 30: DOWN 0.8 percent at 9,981.24 points (close)
Paris – CAC 40: DOWN 0.6 percent at 4,330.13 points (close)
EURO STOXX 50: DOWN 0.6 percent at 2,931.10 (close)
Tokyo – Nikkei 225: UP 1.4 percent at 16,723.31 (close)
Hong Kong – Hang Seng: DOWN 0.6 percent at 21,673.20 (close)
Shanghai – Composite: DOWN 0.2 at 3,036.60 (close)
Euro/dollar: DOWN at $1.1023 from $1.1075
Pound/dollar: DOWN at $1.3101 from $1.3257
Dollar/yen: UP at 106.08 yen from 106.14 yen