Europe close: US-China trade news offset slump in crude oil futures

By Alexander Bueso

Date: Tuesday 13 Nov 2018

Europe close: US-China trade news offset slump in crude oil futures

(Sharecast News) - Stocks in Europe bounced back, helped by quite positive headlines around the ongoing trade talks between China and the US, as well as early gains on Wall Street, which more than offset the drag from the downdraft in crude oil futures.
Whip-saw trading conditions left many analysts' market commentary outdated as soon as they hit the 'send' button, after the Director of the US National Economic Council, Larry Kudlow, told broadcaster CNBC that US and China trade talks had restarted and were ongoing "at all levels", alongside "very good communication" with the European Union and Japan.

In parallel, reports overnight indicated that US Treasury Secretary, Steve Mnuchin, and China's vice-premier, Liu He, had a telephone conversation last Friday and although no concrete proposals resulted from the meeting, Liu was now expected to visit Washington D.C. in the near future.

Kudlow also clashed with White House trade advisor, Peter Navarro, who on Friday had warned 'Wall Street' not to try and steer discussions.

Against that backdrop, the benchmark Stoxx 600 rose 0.67% or 2.41 points to 364.44, alongside a 1.30% or 146.78 point advance to 11,472.22 for the German Dax and a rise of 0.85% or 42.76 points to 5,101.85 for the Cac-40.

Milan's FTSE Mibtel was also ahead, adding 0.90% or 170.60 points to 19,226.52.

From a sector standpoint, the Stoxx 600's Oil & Gas sector index was down by 1.79% to 326.21 as Brent crude came under intense selling pressure. Going the other way, a gauge of Technology stocks advanced 1.7% to 419.49.

Shares of Autos&Parts firms also fared well, with the corresponding sector subindex running-up by 2.03% to 487.09.

In parallel, front month Brent crude oil futures slid 5.953% to $66.18 a barrel on the ICE.

Among other headwinds for the price of crude oil, OPEC trimmed its global oil demand forecasts for 2018 and 2019 while overnight the International Energy Agency said oil use in automobiles was set to 'peak' over the next seven years.

In another noteworthy development, ECB chief economist, Peter Praet, reportedly said in London that "significant" stimulus was still required in order to support inflation.

On the economic front, the ZEW Institute's economic confidence gauge for November rose by 0.6 points from the month before to reach -24.1 , beating forecasts for a further dip to -25.0.

According to ZEW President, Professor Achim Wambach, recent economic data pointed to weakness in the country's growth over the third quarter, with a key expectations gauge pointing to no improvement over the next six months.

Still ahead on the economic calendar for later in the day, a meeting of the Italian government's Cabinet had been scheduled for 1900 GMT to study the European Commission's request that Rome revise its draft budget proposal for 2019.

In timely fashion, the IMF was expected to publish its Article IV consultation with Italy over coming days and to report to Italian officials on the conclusions of the report on Tuesday evening.

To take note of, on Monday night Spanish President, Pedro Sanchez, unveiled plans to dial back on the prior government's labour market reforms and made the case for constitutional reforms, arguing that it was necessary to give regional governments even more powers.

Farther afield, growth in Russia's gross domestic product printed at up by 1.3% year-on-year for the third quarter (consensus: 1.4%), which was down from 1.9% over the prior three-month stretch.

"Overall, today's data reinforce the impression that the economy is undergoing a slow and bumpy recovery from the 2015-16 recession," said analysts at Capital Economics.

"But there are reasons to think that growth should strengthen in the next few quarters."


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