European stocks slip, dollar climbs as Fed chief makes debut

Logo of the London Stock Exchange

London ended the day down 0.1 per cent despite a boost from US cable giant Comcast launching a surprise rival takeover bid for Sky, sending shares in the British satellite TV giant surging by more than a fifth in value.

Paris slipped less than a point, while Frankfurt gave up 0.3 per cent.

Wall Street stocks were down in late morning trading, with the Dow shedding 0.2 per cent.

Jerome Powell said in prepared remarks at his debut appearance as Fed chairman in Congress on Tuesday that the US economic outlook is strong and that continued gradual increases in the key interest rate will help keep it on track.

Powell said inflation has been held down by temporary factors but is set to rise this year closer to the two percent goal, as wage gains also accelerate at long last.

The Fed raised the benchmark interest rate in December, and has indicated that three rate hikes are expected this year.

However, that was before strong wage gains in the January employment report fuelled fears the Fed will have to raise rates faster to head off inflation.

That sparked a plunge on equity markets which wiped trillions off valuations worldwide, with share prices having gradually recovered in the past couple of weeks.

Many economists now expect four US rate hikes in 2018, with the first coming at the policy meeting in late March.

While Powell gave no hint in his testimony of the number of increases he expects, he was bullish on the outlook, noting that "some of the headwinds the US economy faced in previous years have turned into tailwinds".

Analysts at ING said Powell's written testimony suggest ongoing gradual rate hikes, but that there are hints of "upside risks" for additional increases to interest rates.

"Ahead of his testimony, there was some speculation that he could adopt a slightly more dovish stance, but the written submission doesn't back this up," said ING analysts.

While equities wavered, the dollar pushed higher against its major rivals.

"The greenback was lacklustre in the morning, but the remarks from Mr Powell sent it higher," said market analyst David Madden at CMC Markets UK.

In Asia on Tuesday, Tokyo stocks enjoyed fresh gains after another strong Wall Street performance on Monday, but most other regional markets struggled to maintain momentum.

SKY BIDDING WAR?

In London, star performer Sky rocketed more than 20 per cent higher to £13.31 on the prospect of a bidding war between Comcast and Rupert Murdoch's 21st Century Fox.

Comcast has outgunned Murdoch's entertainment giant with an all-cash offer of £12.50 per share for Sky, or more than £22 billion (US$31 billion) overall.

That is substantially more than the £10.75 per share or £11.4 billion that Fox has offered for the 61 per cent of Sky it does not already own.

"Comcast has gazumped 21st Century Fox with a better takeover offer for Sky shareholders," noted Laith Khalaf, analyst at stockbroker Hargreaves Lansdown.

"This is not a done deal yet though. Sky shares are now trading above the Comcast offer price, so the market clearly smells the scent of some more action before this saga draws to a close."

Key figures around 1630 GMT:

London - FTSE 100: DOWN 0.1 per cent at 7,282.45 points (close)

Frankfurt - DAX 30: DOWN 0.3 per cent at 12,490.73 (close)

Paris - CAC 40: DOWN 0.01 per cent at 5,343.93 (close)

EURO STOXX 50: DOWN 0.3 per cent at 3,454.51

New York - DOW: DOWN 0.2 per cent at 25,667.37

Tokyo - Nikkei 225: UP 1.1 per cent at 22,389.86 (close)

Hong Kong - Hang Seng: DOWN 0.7 per cent at 31,268.66 (close)

Shanghai - Composite: DOWN 1.1 per cent at 3,292.07 (close)

Euro/dollar: DOWN at US$1.2236 from US$1.2317 at 2200 GMT

Pound/dollar: DOWN at US$1.3895 from US$1.3968

Dollar/yen: UP at 107.44 yen from 106.93 yen

Oil - Brent North Sea: DOWN 36 cents at US$67.14 per barrel

Oil - West Texas Intermediate: DOWN 43 cents at US$63.48