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European stocks close at five-month high amid trade and Brexit optimism

Kitco News

LONDON (Reuters) - European shares closed at their highest level in five months on Friday as investors cheered positive signs on U.S.-China trade talks and UK lawmakers’ vote to request a delay in a potentially chaotic exit from the EU.

The pan-European STOXX 600 was up 0.7 percent, its biggest gain in a month, and ended the day at its highest level since Oct. 4. All major bourses were in positive territory, led by Paris’s CAC 40, up 1 percent.

London’s FTSE 100 rose 0.6 percent, lifted by heavyweight oil and mining stocks that were boosted by higher metals and crude prices. Germany’s trade-sensitive DAX was up 0.85 percent.

Turnover picked up on Friday after being generally in line with long-term averages in recent sessions - STOXX 600 volume was almost double its 90-day average as investors rushed to position themselves ahead of another critical Brexit week.

The mood was boosted by growing expectations that Britain will not leave the European Union on March 29 without a deal to minimize economic disruption following Thursday night’s parliamentary votes.

London’s domestically focused midcap index rose 1.1 percent as sterling rallied in late trading.

Thursday night’s votes saw Prime Minister Theresa May’s government narrowly avert an attempt by lawmakers to seize the agenda next week if no Brexit deal has been passed, with the aim of forcing a discussion of alternative options before an EU summit on March 21. She plans to put her deal to the vote for a third time before then.

Investor confidence was also bolstered by news from China’s state news agency that Washington and Beijing were making further substantive progress on trade talks, and upbeat comments from U.S. President Donald Trump.

Gains may be a little overdone given the uncertainty about the outcome of next week’s Brexit votes, a slowing of economic growth and the fact that there has been little more than rhetoric around the U.S.-China trade talks, said Edward Park, deputy chief investment officer at asset manager Brooks MacDonald.

“There are still quite a lot of moving parts (to Brexit),” he said.

Still, technology stocks, which are particularly exposed to China, rallied 2.6 percent, their best day in five months.

They were also lifted by better-than-expected results from U.S. chipmaker and sector bellwether Broadcom, stirring hopes that the industry is recovering from the slowdown in Apple and smartphone demand that knocked earnings late last year.

STMicroelectronics topped the Milan bourse, Infineon jumped 3.9 percent and AMS rallied 7.1 percent.

Some of the individual movers were driven by legal dramas.

UBS, Switzerland’s biggest bank, was down 1.1 percent after saying it was bulking up its litigation provisions after a French court slapped it with a hefty penalty last month.

Wirecard sank almost 9 percent after Citi downgraded the German card payments company. The shares have plunged almost 40 percent since January.

The company rejected a report in the German business daily Handelsblatt, citing court documents, that authorities in Singapore were looking into Wirecard’s operations in India, acquired in 2015.

Norwegian salmon farmers SalMar fell 6.1 percent after a Berenberg downgrade.

Reporting by Josephine Mason; Editing by Kevin Liffey

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