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GLOBAL MARKETS-European stocks hit one-month highs on news of U.S.-China trade talks

Published 09/05/2019, 04:50 PM
Updated 09/05/2019, 05:00 PM
GLOBAL MARKETS-European stocks hit one-month highs on news of U.S.-China trade talks
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* Investors hope for end to U.S.-China trade dispute
* Safe havens fall after China confirms talks
* Safran , Dassault Aviation among top European gainers
* Sterling loses some gains on election worries
* World FX rates in 2019: http://tmsnrt.rs/2egbfVh

By Tom Arnold
LONDON, Sept 5 (Reuters) - European shares rose to fresh
one-month highs and safe-haven assets such as gold and the yen
fell after news of U.S.-China talks set for early October raised
hopes of a de-escalation in their trade war before it further
damages the world economy.
The pan-European STOXX 600 index .STOXX rose 0.63% to
touch its highest level since Aug. 1. France's CAC 40 index
.FCHI jumped 0.79% to hit a more than one-month high,
outperforming major European bourses, aided by a 8% rise in
shares of engine maker Safran SAF.PA after the company upped
its full-year profit forecasts.
The rally followed gains in Asia, with MSCI's broadest index
of Asia-Pacific shares outside Japan .MIAPJ0000PUS gaining as
much as 1.08% to reach its highest since Aug. 2.
U.S. stock futures ESc1 reversed early losses and rose
0.5%.
The Chinese yuan jumped versus the dollar in offshore trade,
while safe-haven assets such as gold, the Swiss franc, and the
yen fell.
China's Commerce Ministry said on Thursday its trade team
would consult with their U.S. counterparts in mid-September in
preparation for negotiations in early October, hinting at
progress in reducing trade friction. Both sides agreed to take actual actions to create
favourable conditions, the ministry added, without giving more
details.
"The general market tone is driven by the announcement of
the meeting of high-ranking officials between China and the
U.S," said Francois Savary, chief investment officer at Swiss
wealth manager Prime Partners.
"But this is not a sustained move into risk-on mode as
nothing concrete has come out of it yet and investors need to
wait to see whether the meeting will happen and what the results
from it will be."

BREXIT NEWS ALSO A POSITIVE
Adding to the upbeat mood, a parliamentary vote in Britain
put the brakes on the nation's no-deal exit from the European
Union, Hong Kong withdrew a contentious extradition bill that
sparked recent protests in the Chinese-ruled city and weeks of
political turmoil in Italy appeared to ease.
"Since yesterday, there has been limited downside in markets
because of what happened in Hong Kong, but now the U.S.-China
talks are the story," said Masayuki Kichikawa, chief macro
strategist at Sumitomo Mitsui Asset Management Co in Tokyo.
"It's the same about Brexit, which means less downside
risk."
Any sign that Washington and Beijing are closer to scaling
back or resolving their trade dispute would lift a significant
burden from the global economy, but many analysts believe the
two sides are dug in for a longer and costlier battle.
Weighing on sentiment was data that showed German industrial
orders fell more than expected in July on poor demand from
abroad, indicating manufacturers in Europe's biggest economy
continue to struggle in the third quarter. In European stocks, Dassault Aviation AVMD.PA joined
Safran in a sharp rise thanks to upbeat earnings updates.
Dassault rose 9%. News of a $5 billion share buyback sent
Equinor EQNR.OL up 5.8%.
UK bank CYBG CYBGC.L slumped 19% after saying it expected
to increase its provision for legacy payment protection
insurance by to 450 million pounds ($552 million).
In currency markets, the British pound lost some of its
overnight gains on concern that an election is still pending,
although Britain might have averted leaving the European Union
next month without a transition deal. Lawmakers are hoping to pass a bill that seeks to stop
Britain from leaving the European Union on Oct. 31 with no
agreement. Against the dollar GBP=D3 , the pound fell 0.3% to $1.2211,
after jumping 1.4% on Wednesday.
Against the offshore yuan CNH=D3 , the dollar fell as much
as 0.2% to 7.1340 yuan.
Spot gold XAU= fell 0.6% to $1542.38 per ounce.
The dollar rose 0.17% to 106.60 yen JPY=EBS and gained 0.3% to
0.9839 Swiss franc CHF=EBS .
The 10-year German Bund DE10YT=RR rose more than 1 basis
point to -0.66%, away from the record lows of -0.743% touched on
Tuesday.
Seizing on recent doubts about whether a European Central
Bank stimulus package next week can match expectations, other
top-rated euro zone yields also increased FR10YT=RR ,
NL10YT=RR , although the rises were small.
Having spiralled lower in the past week after agreement was
reached on a new coalition government in Rome, Italian yields
steadied near their record lows.
The 10-year Italian yield was unchanged at 0.826%
IT10YT=RR , close to the record low of 0.803%. The IT5YT=RR
and 30-year IT30YT=RR Italian bond yields were also little
moved in early trade. U.S. West Texas Intermediate crude CLc1 was 0.6% down at
$55.91 per barrel.

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