Shares rise as China’s Xi backs away from trade war
Markets boosted by Chinese promise to open economy further and lower import tariffs
Traders work on the floor of the New York Stock Exchange at the start of the trading day in New York. Photograph: Justin Lane/EPA
European shares rose on Tuesday after Chinese president Xi Jinping promised to cut import tariffs, fuelling optimism that a trade war between his country and the United States could be averted. Gains were widespread, with the STOXX 600 closing up 0.82 per cent, slightly below Wall Street, where the S&P 500 was up 1.8 per cent in morning trading.
Mr Xi promised to open China’s economy further and lower import tariffs on products including cars, which helped the auto index jump about 1.9 per cent. “We would see this as a major step towards opening the Chinese economy and to easing the very tense trade atmosphere . . . The primary beneficiaries would be German carmakers and the German economy as a whole,” Evercore ISI analysts wrote.
The Iseq traded largely flat on the day, closing only two points higher at 6,638, underperforming markets elsewhere. Financials were boosted after ECB governing council member Ewald Nowotny said in an interview that he “would have no problem” with raising rates under certain conditions.
Bank of Ireland and AIB were up roughly 1 per cent at €7.28 and €4.85 respectively. However, Permanent TSB, which is majority State owned, was down 4.5 per cent at €1.88 amid renewed speculation about the bank’s future as a standalone bank.
Ryanair was halted by an increase in oil prices, which saw its shares fall 0.6 per cent to €16.39. Food group Glanbia was again down nearly 2 per cent at €13.50.
Independent News & Media’s (INM) share price broke a multi-session slide on foot of allegations of corporate governance breaches to close up 1.2 per cent at 8.5 cent.
Recovering mining stocks boosted Britain’s top share index to its highest in six weeks on Tuesday, as concerns around global trade continued to ease. The blue-chip FTSE 100 index was up 1 per cent at 7,266.75 points at the close, with mid-caps also up 1 per cent. Energy and materials sectors drove gains as easing concerns over global trade underpinned commodities prices.
Royal Dutch Shell and BP rose 1.3 to 1.6 per cent, adding 17 points to the index as oil broke above $70 a barrel.
Miners recovered following some large losses in the previous session when stocks with exposure to Russia were hit after the United States unveiled new sanctions on Russian officials, oligarchs and their companies. Glencore rose 2 per cent after the mining giant suspended a deal to swap its shares in Russian aluminium producer Rusal for Global Depository Receipts in EN+ due to the sanctions. Elsewhere, shares in Burberry rose 1.4 per cent, buoyed by a well-received first-quarter sales update from French luxury peer LVMH.
Germany’s BMW rose 1.9 per cent and Daimler was up 1.2 per cent, while Volkswagen surged 4.5 per cent. Volkswagen is reported to be seeking to replace chief executive Matthias Mueller with the head of its core brand, Herbert Diess, as part of a broader overhaul of its management structure to boost efficiency.
The basic resources index gained the most, rising 2.7 per cent, as it also recovered from large losses on Monday when stocks exposed to Russia were hit after the United States announced fresh sanctions. Higher-than-expected quarterly revenues at Oslo-listed TGS Nopec, a key supplier to the oil industry, boosted its share price, which soared more than 15 per cent. The oil and gas sector gained overall as oil hit $70 a barrel on Tuesday, in its biggest two-day rally in nearly a month.
New developments in mergers and acquisitions also moved shares. French payments firm Ingenico rose 7.1 per cent after US competitor Verifone agreed to be taken private for $2.58 billion in cash by Francisco.
Bayer rose 4.7 per cent after the WSJ reported that the US justice department would allow the German drugs and pesticides group to acquire Monsanto in a $62.5 billion deal, after the companies agreed to sell more assets to win antitrust approval.
LVMH rose 4.9 per cent to record highs after the Louis Vuitton owner posted better-than-expected sales growth in the first quarter, helped by thriving Chinese demand for luxury goods.
Wall Street’s main indexes hit session highs on Tuesday as investors’ concerns about rising US-China trade tension receded after Mr Xi promised to cut import tariffs. The so-called Fang stocks – Facebook, Amazon, Netflix and Alphabet’s Google – were up between 1 per cent and 2.6 per cent ahead of Facebook chief executive Mark Zuckerberg’s testimony before US lawmakers on Tuesday and Wednesday.
The CEO is expected to strike a conciliatory tone in an attempt to blunt possible regulatory fallout from the privacy scandal engulfing his social network. Shares of Spectrum Pharma rose 22 per cent after the company provided positive data from its lung cancer drug trial.
Verifone Systems shares rose 52 per cent after the company agreed to be taken private for $2.28 billion. Advancing issues outnumbered decliners on the NYSE for a 4.69-to-1 ratio on the upside and on the Nasdaq for a 3.98-to-1 ratio favouring advancers.
The S&P 500 index showed six new 52-week highs and one new lows, while the Nasdaq recorded 36 new highs and 22 new lows.
– Additional reporting by Reuters