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Europe close: ECB's Draghi, Trump tweets trigger advance

By Alexander Bueso

Date: Tuesday 18 Jun 2019

Europe close: ECB's Draghi, Trump tweets trigger advance

(Sharecast News) - Stocks across the Continent bounded higher after European Central Bank chief Mario Draghi said policymakers in the Eurozone were not resigned to simply accepting low inflation and the leaders of the US and China said they would meet at the G-20 leaders summit at the end of the month in Fukuoka, Japan.
"Central banks, it seems, like to move in groups. The shift from the antipodean central banks came first, and the ECB moving in the direction of more easing may be followed up tomorrow by a more dovish Fed too," said IG's Chris Beauchamp.

Speaking at the annual ECB Forum in Sintra, Portugal, Draghi said that further interest rate cuts remain a part of the ECB tool kit, that the monetary authority remained committed to its price-stability objective and that "considerable" room remained to expand quantitative easing in the euro area.

His remarks pushed the main stock market gauges out of an early rut and stoked a rally in euro area government bond markets.

By the end of trading, the benchmark Stoxx 600 was up by 1.67% to 384.78, alongside a gain of 2.03% to 12,331.75 for the German Dax while the FTSE Mibtel advanced 2.46% to 21,133.78.

In parallel, the yield on the benchmark 10-year Italian government Treasury note was down by 18 basis points to 2.12%.

Draghi's dovish remarks were followed by a surprise announcement from the US President, Donald Trump, who in a post on Twitter said he had a "very good" telephone conversation with Xi Jinping and that planning was under way for an extended meeting during the 28-29 June G-20 summit.

Even lenders' shares managed a higher close, with the corresponding Stoxx 600 sector gauge adding 1.24% to 132.91, while a rival gauge for Autos&Parts added 1.86% and another for Basic Resources climbed 2.38%.

But investor sentiment in equity markets was still very bearish.

According to Bank of America-Merrill Lynch's June global fund manager survey, the results of which were published on Tuesday, investor sentiment was at its most 'bearish' since the last financial crisis with "pessimism driven by concerns over trade war/recession, monetary policy impotence, and low strike prices for policy puts."

Also dampening the mood was news that Washington would deploy a further 1,000 troops to the Middle East.

In other economic news, the ZEW institute's economic confidence index for Germany slumped by a "sharp" 19.0 points from the month before to reach -21.1 points in June.

"The intensification of the conflict between the USA and China, the increased risk of a military conflict in the Middle East and the higher probability of a no deal Brexit are all casting a shade on the global economic outlook.

"On top of this, German industry has been reporting worse than expected figures for production, exports and retail sales for April," comments ZEW President Professor Achim Wambach.

Elsewhere, the European Automobile Manufacturers' Association reported that car sales in the European Union edged higher by just 0.04% against their year ago level in May to reach 1.44m vehicles.

German chip maker Siltronic pared early losses to end the day down by 5% after warning of the impact that US restructions on Chinese exports would have.

Infineon reversed early losses, adding 1.81% even after going cap in hand to investors for €1.5bn to help fund its acquistion of US rival Cypress Semiconductor.

Swedbank was down 1.3% after announcing that it had fired two executives at its Estonian unit.

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