By Barbara Kollmeyer, MarketWatch
European stocks on Thursday booked the best one-day rally in nearly two years and ended at a three-week peak as investors’ concerns about a global trade war weren’t enough to stop a rotation in to assets perceived as risky such as stocks.
How markets are moving
The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP -0.49% rallied 2.4% to 376.13, the first gain in a week after drops of 0.5% for both Tuesday and Wednesday. The daily move is the sharpest since June 29, 2016, according to FactSet data, and puts the benchmark on track for its best weekly gain since the week ended March 9.
In Frankfurt, the DAX 30 /zigman2/quotes/210597999/delayed DX:DAX -0.62% soared 2.9% to 12,305.19, after a 0.4% drop on Wednesday, representing its best single-session gain since April 24, 2017. In Paris, the CAC 40 index /zigman2/quotes/210597958/delayed FR:PX1 -0.54% rallied 2.6% to 5,276.67, also its best one-day rise since late April of 2017. Meanwhile, the U.K.’s FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX -0.44% jumped 2.4% to 7,199.50—its best daily rally since June 29, 2016.
The euro /zigman2/quotes/210561242/realtime/sampled EURUSD -0.0092% traded at $1.2256, up from $1.2278 late Wednesday in New York.
What’s driving markets
European stocks were feeding off optimism that has been sending equities across the globe higher, reversing much of the previous day’s downtrend. That upbeat mood has been fueled by an easing of global trade-war worries, as investors assessed the potential for the U.S. and China to step back from their tariff plans in negotiations over the next six months.
Trade hostilities between the world’s two biggest economies, and the likely fallout in corporate damage, have been taking a toll on global stock markets in recent sessions, scaring away investors.
Those hopes for a trade truce boosted U.S. stocks late Wednesday, helping the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.78% pull back from an intraday loss of 510 points to close higher. Asia stocks followed suit to end with gains. U.S. stock futures were pointing to a modestly higher open for Thursday.
What strategists are saying
“Having been consumed yesterday by the fear that tariffs would continue to be imposed, today investors are aiming to find the positives, noting that several senior U.S. officials have struck a conciliatory tone,” said Chris Beauchamp, chief market analyst at IG.
But he said the market could easily miscalculate, as the trade-war tussle is turning into a game of chicken.
“Sharp rallies over the past two months have been the excuse for more selling, and there is still a lot of work to do before we can be sure that the bears have been sent back into hibernation,” he said in a note to clients.