European stocks rally on US-China trade talks breakthrough

European stocks rally on US-China trade talks breakthrough

LSE London Stock Exchange
Logo of the London Stock Exchange.

LONDON: European stock markets surged on Monday (Jul 1) after US President Donald Trump and Chinese counterpart Xi Jinping agreed on the sidelines of the G20 summit to restart trade talks, reviving hopes of an end to their tariff war.

Trump's historic visit to North Korea also at the weekend, where he met leader Kim Jong Un, further soothed geopolitical concerns and propelled the dollar, as investors shunned havens, notably gold.

Oil prices also rose after OPEC and its oil producing allies appeared firmly on course to extend their oil output caps.

"European markets are uniformly higher, particularly the heavily China-exposed DAX" index in Frankfurt, noted Fiona Cincotta, a senior market analyst at City Index trading group.

'NICELY HIGHER'

German stocks were supported also by official data showing unemployment in Germany held steady in June.

US stocks were also higher, with the Dow Jones Industrial Average up around 125 points in the late New York morning having, however, given up about half of its opening gains.

The broader S&P index even set a new record high at the opening.

However Wall Street optimism may take a hit after fresh data on Monday showed that US manufacturing activity last month fell to its lowest level in nearly three years.

"US stocks are nicely higher in early action to begin the third quarter, with global markets rallying on the weekend's G-20 summit in Japan that delivered a trade truce between the US and China that agreed to hold off on implementing further tariffs," analysts at Charles Schwab said.

Trump said negotiations to resolve the standoff between the US and China - the world's two biggest economies - were "back on track", adding that he would hold off imposing threatened new levies on Chinese goods.

Trump also signalled a softer position on Chinese telecom giant Huawei, a major bone of contention in the row, by saying US companies could sell equipment "where there's no great national security problem".

China meanwhile pledged to buy more US agricultural machinery.

'EXHAUSTED SIGH OF RELIEF'

"Investors heaved a massive, but exhausted, sigh of relief that both the US and China opted to push the reset button and restart trade negotiations amidst other pleasantries -- now we'll have to see whether it all sticks," said Stephen Innes at Vanguard Markets.

Elsewhere on Monday, the WTI oil price jumped back above $60 per barrel for the first time in a month after OPEC kingpin Saudi Arabia and non-cartel producer Russia said they would extend caps on crude output.

"Everyone supported the proposition to extend for nine months the limits agreed in December," Russian Energy Minister Alexander Novak told reporters after a gathering of oil ministers and before the cartel's main meeting later Monday.

Oil prices gave up some of their gains, however, as analysts suspected OPEC and its allies couldn't put to rest all of the worries hanging over the oil market.

"As such, the new deal will probably fail to address the rising non-OPEC supplies at a time the world economy is slowing, which could mean lower demand growth," Forex.com analyst Fawad Razaqzada told AFP.

"Thus, the oil market is likely to be oversupplied again in due course, which means prices may struggle to push significantly higher from here," he added.

Key figures around 1540 GMT:

London - FTSE 100: UP 1.0 per cent at 7,497.50 points (close)

Paris - CAC 40: UP 0.5 per cent at 5,567.91 (close)

Frankfurt - DAX 30: UP 1.0 per cent at 12,521.38 (close)

EURO STOXX 50: UP 0.7 per cent at 3,497.59

Tokyo - Nikkei 225: UP 2.1 per cent at 21,729.97 (close)

Shanghai - Composite: UP 2.2 per cent at 3,044.90 (close)

Hong Kong - Hang Seng: Closed for a holiday

Euro/dollar: DOWN at US$1.1317 from US$1.1375

Dollar/yen: UP at 108.30 yen from 107.82

Pound/dollar: DOWN at US$1.2649 from US$1.2700

Brent North Sea crude: UP US$1.06 at US$65.80 per barrel

West Texas Intermediate: UP US$1.16 at US$59.63 per barrel

Source: AFP/de

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