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Europe shares flat ahead of Sino-U.S. trade deal; auto stocks down

Kitco News

(Reuters) - European shares were largely unchanged on Monday as weakness in automobile stocks on the prospect of lower sales in China countered a boost from the expected signing of an interim U.S.-China trade deal later this week.

The benchmark European STOXX 600 index was down 0.07% by 1240 GMT.

The index had been undercut last week by concerns over a military standoff between the United States and Iran, although a later easing in tensions, along with China’s confirmation of the trade deal, nudged markets to another record high last week.

The Phase 1 trade deal is due to be signed at the White House on Wednesday, marking the first step towards ending a bruising 18-month trade war between the world’s two largest economies.

With scant details known of the agreement reached last month, investors will be looking for the “precise legal wording of the deal,” said Vishnu Varathan, senior economist at Mizuho Bank.

Among individual movers, Renault SA (RENA.PA) fell to a six-year low after a media report said Japan’s Nissan (7201.T) had accelerated secret contingency planning for a potential split from the French carmaker.

Other automobile stocks .SXAP were also down, after China’s top auto body reiterated predictions that sales were likely to shrink for the third consecutive year in 2020.

European carmakers have grappled with weakening global demand for several years, exacerbated by slowing demand in the world’s second-largest economy.

In a bright spot, technology stocks .SX8P rose as much as 0.7% to their highest in 18-1/2 years on Monday, as investors bet on broader growth in the wake of easing military and trade tensions.

“It’s part of an ongoing momentum since late last year,” said Neil Campling, analyst at private bank Mirabaud in London. “You’ve got investors looking to buy themes by growth and technology is seen as a key growth sector.”

British security software maker Avast (AVST.L) rose to the top of the tech index, adding 3.6% after a JP Morgan upgrade. Swedish telecommunication technology maker Ericsson (ERICb.ST) also rose after a Citigroup upgrade.

Utility firm Pennon Group (PNN.L) was the top gainer on the STOXX 600 after a report said U.S. private equity firm KKR submitted a bid for Pennon’s waste management arm Viridor.

Reporting by Ambar Warrick in Bengaluru; Editing by Catherine Evans

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