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European stocks regain ground, hoping for smoother U.S.-China trade

Kitco News

(Reuters) - European shares gained on Tuesday, recovering most of the previous session’s losses, as optimistic comments from Washington and Beijing helped soothed investors’ fears about the top two economies’ intensifying trade spat.

U.S. President Donald Trump said he had an “extraordinary” relationship with Chinese President Xi Jinping and trade talks had not yet collapsed. Earlier in the day, China said it agreed to continue talks on trade.

The pan-European STOXX 600 index climbed 1%, lifting off Monday’s two-month low which came after China slapped retaliatory tariffs on U.S. goods, spurring investors into scaling back risky bets as they fled to safer shores.

Robert Griffiths, equity strategist at Credit Suisse, said he believed Trump would not be willing to risk the effect a second round of tariffs would have on the U.S. economy, thus leaving scope for a de-escalation.

Germany’s trade-sensitive DAX and London-listed equities tacked on 1%, while French stocks gained 1.5%. [.L]

Trade sensitive European auto and tech stocks bounced 2.2% and 1.2% each, after being caught at the heart of Monday’s selloff, at which point the STOXX 600 had outperformed the S&P 500.

Lukas Daalder, BlackRock’s chief investment strategist for the Netherlands, said hopes the euro zone economy is through the worst and bottoming out, relatively low valuations and optimism around a U.S.-China deal will soon be brokered were helping fuel the gains.

However, the STOXX 600 is down 3.8% this month, set for its biggest monthly loss since December.

Among auto stocks, Ferrari added 3.3%, leading the sector index’s rise. On the other hand, Renault tempered sector gains, falling 2.3%.

The French carmaker’s Japanese partner, Nissan Motor Co, flagged its weakest annual profit in more than a decade.

Banks rose 0.9% percent, with Commerzbank up 4.3% after Reuters reported UniCredit had stepped up preparations for a potential bid for the German lender.

Unicredit shares fell 1.7%, on a day when Italian banks’ shares were pressured due to their holdings of the country’s sovereign bonds. [GVD/EUR]

Italian cable maker Prysmian and German pharma group Evotec climbed 7.5% and 5%, respectively, on positive earnings updates.

Vodafone slid after a dividend cut, walking back on a pledge to maintain one of the biggest payouts in Britain, so it can build 5G networks and complete its looming acquisition of Liberty Global assets.

Bayer shares ended 2% lower, after hitting seven-year lows earlier in the day. A jury awarded more than $2 billion to a California couple in the largest U.S. jury verdict against the company over allegations its Roundup weed killer causes cancer.

Reporting by Danilo Masoni, Josephine Mason, Editing by Ed Osmond

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