European stock markets rally on fresh trade talk hopes

European stock markets rally on fresh trade talk hopes

LSE London Stock Exchange
Logo of the London Stock Exchange.

LONDON: European stock markets rallied on Monday (Aug 19) after US President Donald Trump's top economic advisor hailed "positive" trade talks with Chinese negotiators.

"As the new week kicks off, stocks are in demand amid increased optimism over US and China reaching a trade deal and as investors anticipate stimulus measures to shore up slowing economies," noted Fiona Cincotta, analyst at City Index trading group.

"After a disastrous previous week which saw equities experience the worst week this year, risk appetite was showing strong signs of improving."

Washington and Beijing are working to revive pivotal talks aimed at ending a trade war that has roiled world markets, Trump's chief economic advisor Larry Kudlow said on Sunday.

'TALKING!'

The US president himself weighed in on Twitter, saying, "We are doing very well with China, and talking!"

In another tweet, he added that the US economy was "poised for big growth after trade deals are completed," and that China is "eating Tariffs."

There remains a high level of concern however about the global outlook and particularly the US economy after the yield on 10-year US Treasury bonds last week slid below that of the two-year note, while the 30-year yield fell below two percent for the first time ever.

This so-called "inversion" - when short-term interest rates are higher than longer-term ones - is viewed as a harbinger of recession.

A majority of economists expect a US recession in the next two years, but have pushed back the onset, according to a survey Monday from the National Association for Business Economists.

'PLEASANT START'

The German economy could meanwhile enter a recession in the third quarter because of a "sharp" decline in industrial production held back by international trade tensions, the Bundesbank warned on Monday.

"The economy could contract again slightly," Germany's central bank said in its monthly report, following a 0.1 per cent decline in gross domestic product in the second quarter.

According to Germany's Der Spiegel newspaper, Angela Merkel's government is ready to boost public spending.

China has meanwhile announced an interest rate reform that it said would lower borrowing costs for companies.

"The week is off to a pleasant start, with traders seemingly buoyed by Chinese lending rate reforms and the prospect of German fiscal stimulus," said Oanda analyst Craig Erlam.

In foreign exchange, the pound dropped on reports the UK government expects that a no-deal Brexit on Oct 31 could cause serious food, fuel and medicine shortages.

The government's leaked readiness report found British businesses remain largely unprepared for no-deal - despite a Bank of England survey in March finding around 80 per cent judged themselves ready.

Key figures around 1540 GMT:

London - FTSE 100: UP 1.0 per cent at 7,189.65 points (close)

Frankfurt - DAX 30: UP 1.3 per cent at 11,715.37 (close)

Paris - CAC 40: UP 1.3 per cent at 5,371.56 (close)

EURO STOXX 50: UP 1.2 per cent at 3,369.19

Tokyo - Nikkei 225: UP 0.7 per cent at 20,563.16 (close)

Hong Kong - Hang Seng: UP 2.2 per cent at 26,291.84 (close)

Shanghai - Composite: UP 2.1 per cent at 2,883.10 (close)

Euro/dollar: UP at US$1.1093 from US$1.1089 at 2100 GMT Friday

Pound/dollar: DOWN at US$1.2136 from US$1.2149

Euro/pound: UP at 91.41 pence from 91.25 pence

Dollar/yen: UP at 106.55 yen from 106.36 yen

Brent North Sea crude: UP 69 cents at US$59.33 per barrel

West Texas Intermediate: UP 82 cents at US$55.63 per barrel

Source: AFP/de

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