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Europe midday: Stocks hold higher amid investor optimism

By Alexander Bueso

Date: Monday 19 Jun 2017

Europe midday: Stocks hold higher amid investor optimism

(ShareCast News) - European stocks are holding higher amid investor optimism following the result of the French legislative elections at the weekend.
As of 1147 BST the benchmark Stoxx 600 was up by 0.65% or 2.52 points at 391.12, alongside a gain of 0.91% for Paris's Cac-40 to 5,311.54 and an advance of 0.81% or 104.01 points to 12,856.41 in Germany's Dax.

French president Emmanuele Macron's upstart centrist party and its ally Modem won roughly 360 of 577 seats in the parliament in Paris in a run-off vote on Sunday, giving it a comfortable majority with which to push ahead with their programme of economic reforms.

"Europe is popular again. The rise of Emmanuel Macron highlights the trend. Amid firm economic growth at low inflation, the backdrop for serious reforms in the EU27 and the Eurozone is unusually auspicious," said Holger Schmieding, chief economists at Berenberg.

However, a record low rate of voter participation of 43.5%, which was 10 percentage points less than the previous record low was not lost on market observers.

"Small risks remain. A high abstention rate suggests Macron is likely to face public protests, potentially stifling the reform process," said Marion Amiot at Oxford Economics.

Nevertheless, Amiot raised her forecasts for French GDP growth in in 2018 by 0.2 percentage points to 1.7% and by one tenth of a percentage point for 2019 to 1.6%. Macron's reforms should make the jobs market more flexible, with lower corporate taxes and an envisaged €50.0bn of investment stimulating hiring and spending.

The start of Brexit negotiations were also on investors' radar. Arriving in Brussels, Brexit Secretary David David said "challenges" lay ahead but he believed the two sides could reach an agreement which "works in the best interests of all citizens".

Acting as a backdrop, over the weekend the British Chancellor cautioned that leaving the European Union with no deal in place would be a "very, very bad outcome for the UK."

On the other hand, the worst scenario might be a pact that was deliberately structured to punish the UK, Hammond added.

In parallel, front month Brent crude futures were up by 0.32% to $47.52 a barrel on the ICE, while euro-dollar was edging higher by 0.11% to 1.1210.

Construction output in the Eurozone increased by 0.3% month-on-month and 3.2% year-on-year in April. In March 2017 it rose by 3.8%.

Later in the session, US New York Fed president William Dudley was scheduled to deliver a speech at 1300 BST, followed by his opposite number at the Chicago Fed, Charles Evans, after midnight.

Credit Suisse was a top gainer on the back of supportive comments from multiple brokers; including Citi, whose analysts told clients the stock was "too cheap" at its then current levels.

Jet-maker Airbus showcased an upgraded version of its superjumbo A380 which included a new wingtip assembly which reduces fuel consumption by as much as 4%.

Germany's Rocket Internet set a price range of between €22.0 to €25.50 per share for the stockmarket listing of Delivery Hero.

Analysts at Morgan Stanley raised their target prices for E.On and RWE from €7.30 and €18.0 to €10.30 and €20.40, respectively. However, they downgraded their recommendation on the latter from 'overweight' to 'equalweight', saying its valuation looked "too rich".


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