By Silvia Ascarelli, MarketWatch
European stocks pushed higher on Monday, with gains accelerating in afternoon trade as the U.S. stock market powered higher following an agreement between the U.S. and Mexico on trade issues.
Germany’s benchmark led major indexes higher, driven by the auto sector, which is seen benefiting from the easing of trade tensions.
What are markets doing?
The Stoxx Europe 600 /zigman2/quotes/210599654/delayed XX:SXXP -0.36% rose 0.5% to close at 385.56, after gaining 0.7% last week for its first weekly gain in a month. However, the pan-European gauge is down 0.9% so far this year, a contrast to the hefty gains for some U.S. benchmarks.
Germany’s DAX 30 /zigman2/quotes/210597999/delayed DX:DAX -0.24% jumped 1.2% to close at 12,538.31 for its fifth gain in six sessions, after climbing 1.5% last week. That cut losses for the year to 2.9%.
France’s CAC 40 /zigman2/quotes/210597958/delayed FR:PX1 -0.10% also rose for the fifth time in six sessions, ending up 0.9% at 5,479.10. Italy’s FTSE MIB /zigman2/quotes/210598024/delayed IT:I945 -0.17% , an early decliner, turned around to end up 0.3% at 20,797.82.
The U.K market is closed for a holiday; the FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX -0.20% rose 0.25% last week.
The euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.5657% firmed to $1.1673, compared with $1.1622 late Friday in New York.
What is driving the market?
While the trade deal with Mexico was a powerful catalyst, stocks had started broadly higher as they continued to get a lift from Federal Reserve Chairman Jerome Powell’s remarks on Friday that affirmed the U.S. central bank would continue its strategy of gradually normalizing its monetary policy. Both the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.19% and Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -0.27% closed at records on Friday. U.S. markets were posting further gains on Monday.
Germany’s Ifo report showed stronger-than-expected business confidence, despite the continuing rumblings over trade wars and tariffs with the U.S. Europe’s largest economy is “performing robustly.” The business climate index jumped to 103.8 in August from 101.7 in July and besting a forecast of 101.9. It was the first increase since November and pushed the index to its highest level since February.
Turkish markets reopened following a holiday, and the lira /zigman2/quotes/210561895/realtime/sampled USDTRY +0.4664% once again weakened.
Shares of struggling German retailer Metro AG /zigman2/quotes/206092556/delayed DE:B4B3 0.00% /zigman2/quotes/207598928/delayed DE:B4B -1.56% /zigman2/quotes/208674966/delayed XE:B4B3 -1.34% led the day’s gainers, surging 12% as one of the midcap company’s largest shareholders said it was in talks to sell most of its 10% stake to an investor group. Ceconomy’s /zigman2/quotes/203084727/delayed DE:CEC -2.32% announcement comes after another shareholder, the Haniel investment group, on Friday said it would sell a 7.3% stake to the same investor group led by Czech billionaire Daniel Kretinsky.
Lundin Petroleum rose 3.5%. The company owns 22.6% of the Johan Sverdrup oil field, the largest discovery in the North Sea in more than three decades. An update issued Monday says it will deliver more oil and be cheaper to develop than previously forecast. Shares in Equinor /zigman2/quotes/203290881/delayed NO:EQNR -2.82% , the largest investor in the oil field, were up just 0.7%. Lundin also announced much higher resource estimates for another, smaller North Sea site in which it has a 50% working interest.
Gains for German blue-chips were led by Continental /zigman2/quotes/202192628/delayed DE:CON -0.61% , a tire maker whose shares had plunged last week on the heels of cuts to sales and margin guidance, as well as car makers Volkswagen /zigman2/quotes/204309985/delayed DE:VOW3 -0.19% and Daimler /zigman2/quotes/205332368/delayed DE:DAI -0.26% .
Continental jumped 3%, while VW and Daimer were each up 2.5%. BMW /zigman2/quotes/209548467/delayed DE:BMW -0.06% rose 2.3%. U.S. auto stocks were also jumping on the news of the U.S.-Mexico trade deal.