Portfolio

Europe close: Shares bounce back despite sceptical investors

By Alexander Bueso

Date: Tuesday 14 May 2019

Europe close: Shares bounce back despite sceptical investors

(Sharecast News) - Stocks finished at their best levels of the session with investors drawing a degree of reassurance from the more dovish sounding headlines on Tuesday around the intensifying US-China trade conflict.
Nevertheless, in the background analysts and policymakers were trying to gauge the potential downside for stocks from a protracted commercial dispute between the two economic giants.

"Having come off the back of big losses yesterday, markets in Europe have rebounded today, helped to some extent by the reduced prospect of an immediate escalation, and a slightly softer tone from President Trump in some of his tweets this morning. It should the fact that there is still a couple of weeks to go until China's retaliation kicks in on 1st June, and similarly any new US tariffs on Chinese goods won't take effect until Chinese goods hit US shores in about 10 days' time," said CMC Markets UK's chief market analyst, Michael Hewson.

"There appears to be a degree of calculation going on here in that investors appear to be banking on any increased tariffs being in place for only a short period of time, with a deal being concluded soon after, hence today's rebound. Time will tell whether that belief is prescient or nave."

By the end of trading, the benchmark Stoxx 600 had put on 1.01% to 376.34, alongside a gain of 0.97% to 11,991.62 for the German Dax while the FTSE Mibtel had climbed 1.45% to 20,892.66.

Front month Brent crude oil futures meanwhile were up by 1.74% following reports of a drone attack against a Saudi oil pipeline, but euro/dollar was little changed, drifting down by 0.07% to 1.1214.

In the background, in remarks made overnight, US President Donald Trump said the success or failure of the last round of trade talks would be apparent "in about three or four weeks".

"You never really know, right? But I have a feeling it's going to be very successful," he said.

In parallel, speaking from Russia, China's top diplomat, Wang Yi, said both countries had the "ability and wisdom" to reach a 'win-win' outcome.

The corporate news flow centred on the banking sector on Tuesday, with Reuters reporting that UniCredit was studying a possible bid for Germany's Commerzbank.

Meanwhile, in Spain, Santander announced an 11% reduction in its workforce, entailing 3,700 positions and 1,150 branch closures.

Elsewhere, shares of Bayer were under the cosh, but off the seven-year lows that they hit earlier during the session, after a jury in the US awarded over $2bn in damages to a California couple with cancer who had used its Roundup herbicide.

Vodafone stock finished a volatile session at a fresh 52-week low after its boss Nick Read told journalists on a conference call that "there could be further downsides ahead of us [...] on that basis you want to make sure you have sufficient headroom."

Earlier, the company had announced a decision to rebase its dividend payout by 40%.

On the economic front, the ZEW institute's closely-followed gauge of German economic confidence for May fell by 5.2 points from the month before to stand at -2.1 (consensus: 5.0).

Also in Germany, earlier the Federal Office of Statistics confirmed that on a harmonised basis, consumer prices in the Eurozone's largest economy advanced at a year-on-year pace of 2.1% in April.

It was a similar story in Spain, with INE reporting that harmonised CPI rose by 1.6% last month, which was in-line with its preliminary estimate.



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